THE price of oil dropped to its lowest level in a week after reports of a slowdown in Chinese manufacturing.

Benchmark US crude fell by US$1.92 to end at US$105.35 per barrel on the New York Mercantile Exchange. It dipped as low as US$104.50 earlier in the day, the lowest price since US$103.78 on March 15.

Oil prices fell after a London bank said Chinese industrial activity dropped to a four-month low in March. That could slow demand for crude because China's factories are big users of oil.

"Strong Chinese growth is the main reason behind rising oil prices the last couple of years," said Gene McGillian, a broker and oil analyst at Tradition Energy. "As we see slower growth, the thought is that energy demand is going to take a hit."

Brent crude, which is used to price oil imported by US refineries, fell by US$1.06 to end at US$123.14 per barrel in London.

In addition to the report of weaker Chinese manufacturing, oil traders also blamed lower US oil and gasoline demand for pushing down prices. And Saudi Arabia, the world's largest producer, said earlier this week it can quickly boost output by 25 percent if there is a sudden disruption in global supplies. Crude has jumped from US$75 in October as traders worry a military conflict over Iran's nuclear program could cut that country's crude exports.

This year alone, prices are up 7 percent and that continues to lift US gasoline prices to their highest levels ever for this time of year. The national average rose by nearly 2 cents to US$3.88 per gallon (about US$1 a liter), according to auto club AAA, Wright Express and Oil Price Information Service. Experts say gas prices could hit US$4.25 (US$1.12 a liter) by late April.

While in other parts of the world gasoline retails for as much as US$7 or even US$8 a galllon (US$1.85 to US$2.10 a liter), in the US, the size of the country and a less developed network of mass transportation makes Americans more dependent on their cars to drive longer distances to work than elsewhere

In other energy trading, natural gas futures fell by 9.1 cents to end the day at US$2.269 per 1,000 cubic feet. That matches a 10-year low set on March 12.

Heating oil fell by 3.75 cents to finish at US$3.1787 per gallon and gasoline futures gave up 1.75 cents to finish at US$3.3396 per gallon.

Source:shanghaidaily