Oil slips on US slowdown, Iraq supplies

Crude oil fell for a second day in New York on speculation slowing economic growth in the US, the world's biggest energy consumer, will curb demand.

US fuel demand has dropped for seven out of the past eight weeks while a report tomorrow may show manufacturing slumped to a five-year low this month.

Fighting between government forces and militiamen in Iraq, holder of the third- largest proven oil reserves, eased after a truce offer from Shiite cleric Moqtada al-Sadr.

"US demand will likely remain weak for the next few months,'' Goldman Sachs Group analysts including Giovanni Serio said in a report on Monday. ``The combined impact of a weakening economy and high oil price inflation are putting pressure on total US oil demand.''

Crude oil for May delivery fell as much as $1.28, or 1.2 per cent, to $104.34 a barrel in electronic trading on the New York Mercantile Exchange. It was at $104.89 at 1:05 pm in London. Oil in New York has gained 9.5 per cent this quarter.

New York oil futures reached a record $111.80 on March 17 as the slumping US dollar and falling equity prices encouraged investors to seek better returns in commodities. Prices dropped as low as $99.13 last week before rebounding amid renewed fighting in southern Iraq.

Brent crude for May settlement declined as much as 91 cents, or 0.9 per cent, to $102.86 a barrel on London's ICE Futures Europe exchange. It was at $103.61 at 1:06 pm London time. Brent has risen 11 per cent this quarter.

Iraq Violence
An Iraqi oil pipeline that carries about 100,000 barrels a day to the Basra oil terminal was damaged by a fire started by an explosive device on March 27. Two larger pipelines, which together move about 1.5 million barrels a day of crude to the port on the Persian Gulf, were unaffected by the blast.

The pipeline attack came after the Iraq government led by Nuri al-Maliki began raids on the Shiite force led by al-Sadr in Basra, with violence spreading to Baghdad and other cities.

``One `good' thing about having pipelines bombed often is that it teaches a country how to repair them quickly,'' Peter Beutel, president of Connecticut-based consultant Cameron Hanover, said in a report. ``The pipeline was bombed on Thursday and repaired on Friday.''

Hedge-fund managers and other large speculators cut their bets on rising oil prices for a second time last week, the US Commodity Futures Trading Commission reported March 28.

Net-long positions, the difference between orders to buy and sell the commodity, fell 38 per cent to 53,892 contracts on March 25, a six-week low. The same measure fell 24 per cent the week before.

``Open interest in commodities is coming off and large speculative funds are generally reducing length exposure,'' Olivier Jakob, managing director of Petromatrix Gmbh, said in a report.