Oil drops hits new lows for 2011, again

Oil slumps for third day as major investors slash price forecast

Associated Press
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NEW YORK (AP) -- Investors are running out of reasons to bet on higher oil prices.Some of the key factors that drove oil to three-year highs this year -- fears of growing Middle East tensions, rising Chinese demand, bullish views from investment banks and expectations of an aggressive U.S. stimulus plan -- have diminished.Prices have plunged as a result. Benchmark crude has dropped 32 percent since peaking near $114 per barrel in late April. Oil slipped as low as $74.95 on Tuesday, the cheapest price since September of last year. It recovered somewhat, but remains below $77 per barrel.If oil holds at those levels, it will make gasoline cheaper and lower fuel costs for shipping companies and airlines. It also could lead to lower home heating bills this winter.But the decline also comes with an increasingly dim view of the economy. Oil was expected to rise this year as factories expanded and consumers bought more cars. Demand will still rise to new records in coming years, but economists now say it will grow at a slower pace.Goldman Sachs on Wednesday trimmed its forecasts for oil prices, saying energy demand growth will slow down as Europe's debt crisis raises the specter of a second recession. In a separate report, the investment bank cut its expectations for economic growth in China as the U.S. and other countries order fewer Chinese-made products.Wunderlich Securities also cut its forecast for oil, citing the "unrelenting stream of bad news dominated the headlines."Benchmark crude dropped for a third day, giving up $1.06 to $76.55 a barrel in New York. Brent crude lost 86 cents to $100.85 per barrel in London. Earlier in the day, it fell below $100 for the first time since August.Meanwhile, gasoline prices dropped nearly a penny overnight to a new national average of $3.408 per gallon. Gasoline has fallen about 14 percent since peaking in May near $4 per gallon. It's still 69 cents higher than it was last year.In other energy commodities, heating oil was flat at $2.749 per gallon and gasoline futures added less than a penny at $2.518 per gallon. Natural gas rose 0.6 cents to $3.623 per 1,000 cubic feet.

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