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NEW YORK -- Oil prices fell by nearly $1 a barrel after OPEC lowered its 2005 global demand forecast because of reduced consumption in China during the first half of the year and expectations of slower economic growth in other Asian countries.
According to an Associated Press report, the Vienna-based cartel also said its emergency supply cushion would grow in 2006 thanks to rising output and slower growth in worldwide demand.
Light, sweet crude for August delivery was down 84 cents to $57.25 a barrel in afternoon trade on the New York Mercantile Exchange. Heating oil dropped 3.41 cents to $1.628 a gallon, while unleaded gasoline fell 5.53 cents to $1.6330.
The sell-off extended to London's International Petroleum Exchange, where Brent futures for September delivery fell 75 cents to $56.86 a barrel.
The Organization of Petroleum Exporting Countries said in its monthly report that world demand would expand by 1.62 million barrels to 83.66 million barrels a day -- 150,000 barrels a day less than its previous estimate.
While OPEC said it expects demand to exceed 85 million barrels per day in 2006, the cartel said it would have excess production capacity of 4.4 million barrels per day -- more than twice today's level.
The limited supply cushion has been a major factor in the runup in oil prices over the past year, the AP reported, as traders fret over nearly every threat to production around the globe.
On Monday, traders continued to track Hurricane Emily, which slammed into Mexico's Yucatan Peninsula with winds of 135 miles per hour. Markets were watching for any effect on the Cantarell oil field in Mexico, which could instantly cut off around 3 percent of the global supply of 84 million barrels a day, analysts said.
While forecasters predict the storm would not smash into U.S. rigs in the Gulf of Mexico, responsible for around 30 percent of total American output, many oil companies were shutting down platforms as a precaution, and that was expected to disrupt the supply flow.
Shell Oil abandoned three offshore facilities, suspending output of around 1,000 barrels daily and halting 20 million cubic feet of gas production. Mexico's state oil company, Petroleos Mexicanos, has evacuated its Bay of Campeche staff on offshore rigs and closed its taps.
Petroleos Mexicanos exports 80 percent of its 3.4 million barrels worth of daily production to the United States, the world's largest consumer of energy. Dow Jones Newswires reported it had earlier suspended production amounting to nearly half a million barrels of crude.
Vienna's PVM Oil Associates suggested Emily was a boon to speculators "banking on the aftereffects of the Gulf of Mexico outages in particular underpinning prices."
The young 2005 Atlantic hurricane season has been unusually active, and analysts are warning there are more to follow Emily and the earlier Hurricane Dennis.
Last year's Hurricane Ivan hurt output and pushed prices upward after it damaged pipelines and oil rigs.