Oil below $99 as Japan disaster stuns economy

[March 14, 2011]  SINGAPORE (AP) -- Oil prices dropped below $99 a barrel Monday in Asia after a massive earthquake and tsunami devastated northeastern Japan, likely denting demand for crude from the world's third-largest economy.

Benchmark crude for April delivery was down $2.28 at $98.88 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost $1.54 to $101.16 on Friday.

In London, Brent crude was down $1.63 at $112.21 a barrel on the ICE futures exchange.

Officials estimate a 10-meter (33-foot) wall of seawater triggered by an 8.9 magnitude quake off the coast of northern Japan on Friday killed at least 10,000 people and severely damaged the country's energy infrastructure. The benchmark Nikkei 225 stock average fell more than 6 percent Monday.

"This disaster has in effect temporarily frozen the world's third largest economy," said Richard Soultanian of NUS Consulting. "It seems clear that Japan's appetite for crude oil may be diminished in the near-term which should provide previously unforeseen slack in international oil markets."

Three of Japan's five largest refineries have been shut down, which will immediately crimp demand for crude. Japan is the world's third-largest crude consumer at 4.5 million barrel a day, the second-largest net oil importer and the biggest importer of liquefied natural gas and coal.

Traders were also selling Monday on disappointing U.S. February retail sales data released Friday, which suggest the recent jump in crude prices is beginning to hurt demand for gasoline.

"Put simply, demand destruction is taking place, whether that's in Japan or in the U.S. at the pump," energy consultant The Schork Report said. "A very bearish picture for crude oil."

Investors had been concerned about possible unrest in OPEC leader Saudi Arabia but police prevented a protest organized by pro-democracy activists on Friday in the capital, Riyadh.

In other Nymex trading for April contracts, heating oil was down 1.9 cents at $3.01 a gallon and gasoline dropped 3.1 cents to $2.96 a gallon. Natural gas rose 5.3 cents to $3.94 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

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