Oil Drops Below $120 As Consumer Spending Slows

New York, NY (AHN) - Crude oil prices declined below $120 a barrel mark for the first time in three months as the production may not be hurt by Tropical Storm Edouard.

Additional factor is the rise in core inflation for June and slowdown in consumer spending that may affect demand of crude, the Commerce Department said on Monday in Washington.

On Friday, crude advanced by $1.02 to $125.10 a barrel in New York Mercantile Exchange, over indications that Iran will not give up its nuclear program, leading to the rise in the Middle Eastern tension.

A light sweet crude-futures barrel for September delivery dropped by $5.60 a barrel to $119.50 a barrel in electronic trading before it retreated slightly.

Oil futures was recently trading down by $3.92, or 3.1 percent, to $121.18 a barrel in afternoon trading despite a tropical storm in the Gulf of Mexico and rising tensions in the Middle East are likely to affect the production and supply of oil.

Warnings have been issued from the mouth of the Mississippi River to San Luis Pass, Texas, according to the National Hurricane Center in Miami.

The tropical storm, which may strengthen in to a hurricane by Tuesday, threat led to the evacuations of rig in the Gulf and it is on course for the coast of Texas.

Gasoline for September delivery declined by 8.47 cents, or 2.8 percent, to $2.9996 a gallon on the NYMEX after it fell to the lowest since May 5, down to $2.9704 a gallon on Monday.

Natural-gas futures dropped below $9 per million British thermal units, by 41.9 cents to $8.97 on Monday.

Consumer spending, which accounts for about 70 percent of GDP, increased by 0.6 percent at an annual rate in June less than estimated, compared to the increase of 0.8 percent in May.

While, consumer inflation surged to 0.8 percent, which is the highest monthly rise since February 1981, while core prices, excluding food and energy prices, increased by 0.3 percent in June as estimated.