NEW YORK (AFP) — Oil prices slid Thursday, a day after a powerful rally, after weaker-than-expected US economic growth stoked fresh concerns about global energy demand.
New York's main oil futures contract, light sweet crude for September delivery, dropped 2.69 dollars to close at 124.08 dollars a barrel.
In London, Brent North Sea crude for September delivery tumbled 3.12 dollars to settle at 124.73 dollars.
The Commerce Department reported the world's largest economy grew an annualized 1.9 percent in the second quarter, accelerating from a downwardly revised 0.9 percent first-quarter growth in gross domestic product (GDP).
The second-quarter pace missed market expectations of 2.3 percent growth. In addition, the department revised the first-quarter growth down by 0.1 percentage point, from 1.0 percent, and lowered 2007 fourth-quarter growth to a 0.2 percent contraction from a prior estimate of a 0.6 percent gain.
It was the first time the US economy has slid into the red since the 2001 recession.
Traders said that falling oil prices reflected slackening energy demand in the United States.
"It is clear that consumption is slowing" in response to weak economic conditions, said Antoine Halff, an analyst at Newedge Group.
Crude has fallen 23 dollars since reaching a record peak above 147 dollars on July 11 amid concerns about the health of the world's biggest oil guzzler.
But Wednesday crude had shot up more than four dollars on news of a surprise drop in US gasoline inventories and a shock announcement by Israeli Prime Minister Ehud Olmert that he would step down in September, casting a shadow over Middle East peacemaking.
"Momentum is still to the downside, although yesterday was the first time in more than two weeks the market closed above the previous day's range," said Nimit Khamar, an oil analyst at the Sucden brokerage in London.
In its weekly US energy reserves report Wednesday, the Department of Energy (DoE) said that gasoline inventories sank by 3.5 million barrels in the week ended July 25, overturning market forecasts for a gain of 400,000 barrels.
US crude reserves fell by 100,000 barrels in the second straight weekly decline, but the drop was less than the consensus forecast of 1.25 million barrels.
"In our opinion the report was fairly mixed overall," Sucden's Khamar said. "Market participants decided to plough money back into the market after gasoline stocks fell by 3.5 million barrels."
Geopolitical tensions returned to the fore after Olmert's resignation amid a bribery scandal, opening the way for political jockeying inside his centrist Kadima party.
Hawkish Transport Minister Shaul Mofaz, a former defense chief, is seen as a top contender to take the helm of Kadima.
"It should be recalled that just several weeks ago, when tensions with Iran were at their highest, it was he (Mofaz) who said that conflict with Iran was 'unavoidable,'" Mike Fitzpatrick at MF Global said.
Phil Flynn, analyst at Alaron Trading, also noted that oil got a boost Wednesday on word that Olmert was stepping down. "He's under fire for corruption and this led traders to worry if a change in leadership would lead to missiles firing in Iran," Flynn said.
The oil market was poised for a rebound, Libya's Oil Minister Shukri Ghanem told AFP Thursday.
"We are following developments (on prices) closely...but we think they will rebound," he said.
Libya is a member of the Organization of the Petroleum Exporting Countries, the cartel that supplies 40 percent of the world's oil.
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