Oil prices fell to the $111 level Friday (Aug. 15), reaching their lowest point in more than three months after the dollar muscled higher and OPEC predicted world demand for energy will keep falling.
Light, sweet crude for September delivery fell $3.26 to $111.75 a barrel on the New York Mercantile Exchange, after earlier falling to $111.34, its lowest since May 2 and more than $35, or 24%, below oil’s July 11 trading record above $147.
As high energy costs force countries around the globe to cut back on consumption, crude prices have plummeted and are now within striking distance of $100 a barrel, a level first reached Feb. 19.
At the pump, retail gas prices also continued to fall, with a gallon of regular shedding about half a penny overnight to a new national average of $3.771, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas peaked at $4.114 on July 17.
Crude fell after the dollar gained strength against the euro on U.S. data showing that industrial output rose more than expected in July. The 15-nation euro has lost some of its luster compared to its American rival amid growing evidence that European economies are slowing. The euro bought $1.4672 in trading Friday, down from $1.4811 late Thursday.
A rising dollar typically pushes oil prices lower as investors who buy crude and other commodities as hedges against inflation start dumping their positions to cut their losses. A stronger greenback also makes dollar-denominated commodities more expensive to overseas buyers, further eroding demand.
“The dollar is on fire again so that’s causing people to re-evaluate everything,” said Phil Flynn, oil analyst at Alaron Trading Corp. in Chicago. “It means oil prices could fall dramatically. We could see prices get to double digits if this continues.”
An OPEC forecast of lower demand also put downward pressure on prices.