Oil ends at 3-1/2 month low
Concerns about weaker demand outweigh a weak dollar and storm threat.
NEW YORK (CNNMoney.com) -- Oil prices lost nearly $1 Monday, finishing at its lowest point in more than 3-1/2 months, as concerns about falling demand outweighed a weaker dollar.
U.S. crude for September delivery settled down 90 cents to $112.87 a barrel on the New York Mercantile Exchange. It was lowest closing point for crude prices since May 1.
Oil rose as high as $115.35 a barrel earlier in the day as Tropical Storm Fay neared hurricane strength and approached Florida's Gulf Coast. However, prices turned lower after the oil giant Royal Dutch Shell (RDS) said the storm would miss most of its facilities in the Gulf of Mexico.
Storm threat: Worries about Tropical Storm Fay, the sixth major storm of the 2008 hurricane season, pushed prices up earlier in the session. However, while The National Hurricane Center still expect the storm to reach hurricane strength before hitting the Florida Keys later Monday night, investors expect it to bypass major oil facilities in the Gulf of Mexico.
Despite close calls from Hurricane Dolly and Tropical Storm Edouard, no storm has caused significant damage to Gulf Coast oil infrastructure this season.
Global demand: Relief from Fay allowed investors to focus on a downturn in global demand, which has driven oil down about 23% from is mid-July record of $147.27 a barrel.
A monthly report from the Organization of Petroleum Exporting Countries released Friday predicted slower worldwide demand growth from the United States and other developed nations.
OPEC reaffirmed its prediction that demand for crude in 2009 would grow by 900,000 million barrels a day, down from an increase of 1 million barrels a day in 2008. It would be the lowest level of worldwide demand growth since 2002, according to OPEC.
Investors also see falling demand in emerging economies such as China and India, which were responsible for much of oil's rise, according to Chris Lafakis, associate economist with Moody's Economy.com.
"Weakness in developed economies translates into weakness in developing ones," he said.
Dollar: The dollar was down against the euro and yen on Monday, ending a recent upward streak and buoying oil prices.
The dollar climbed to a six-month high against the euro on Friday, pulling oil down.
"We've seen a significant dollar strengthening over the last couple of weeks," said Rachel Ziemba, energy analyst with RGE Monitor. If the dollar weakens further, investors may become concerned that commodities have sold off too quickly, she said.
A weak dollar helped drive crude's rise this year. Crude is traded in dollars, and a weaker greenback makes oil relatively cheaper for foreign buyers. But the greenback mounted a comeback last week.
Gasoline: Demand for crude in the United States, the world's largest oil consumer, has been threatened by high gas prices.
Gas prices at the pump fell for the 32nd straight day to a nationwide average of $3.741 a gallon, motorist group AAA reported Monday.
Gas prices have fallen below $4 a gallon in all but five states. However prices remain nearly $1 above where they were a year ago. 
