Oil falls below $66 on US consumer confidence drop

[July 29, 2009]  LONDON (AP) -- Oil prices fell below $66 a barrel Wednesday, reflecting weak demand outlook shown by a drop in U.S. consumer confidence and rising crude inventories.

Benchmark crude for September delivery was down $1.36 to $65.87 a barrel by noon in European electronic trading on the New York Mercantile Exchange. On Tuesday, the contract fell $1.15 to settle at $67.23.

"In familiar fashion, the decline occurred in line with losses on Wall Street and a strengthening dollar," Vienna's JBC Energy noted. Traders look to U.S. stocks and the American currency for direction, buying into crude as a hedge against dollar weakness and selling as the greenback strengthens.

The Conference Board said Tuesday its Consumer Confidence Index fell more than analysts expected in July, a bad sign for U.S. gasoline demand, which has already disappointed investors so far this summer.

U.S. crude inventories rose more than expected last week, another signal demand remains tepid despite an improving economy.

Inventories rose 4.1 million barrels last week, the American Petroleum Institute said late Tuesday. Analysts expected the API numbers to gain 1.1 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Investors will be watching for inventory data from the Energy Department's Energy Information Administration on Wednesday for more signs about crude demand.

The API numbers are reported by refiners voluntarily while the EIA figures are mandatory.

In other Nymex trading, gasoline for August delivery fell nearly 2 cents to $1.89 a gallon and heating oil dipped slightly to $1.76. Natural gas for August delivery slid 5 cents to $3.48 per 1,000 cubic feet.

In London, Brent prices fell 98 cents to $68.90 a barrel on the ICE Futures exchange.

[Associated Press; By GEORGE JAHN]

Associated Press writer Alex Kennedy contributed to this report from Singapore.

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