Oil settles just above $119

Crude prices hit 3-month low after Fed holds rates steady, sparking more demand concerns for oil.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Kenneth Musante and David Goldman, CNNMoney.com staff writers

Solving the energy crisis: You decide Solving the energy crisis: You decide Solving the energy crisis: You decide
As Americans grapple with record oil and gas prices, politicians facing angry voters have offered up a variety of solutions. Tell us what you think.
The airline fee I dislike most is:
  • Fuel surcharge
  • Baggage fee
  • Pillow and blanket charge
  • Coffee and water charge

NEW YORK (CNNMoney.com) -- Oil prices fell to near $119 a barrel Tuesday - the lowest settle price in more than three months - after the Federal Reserve held its key interest rate at 2%.

U.S. crude for September delivery fell $2.24 to $119.17 a barrel on the New York Mercantile Exchange. That marked oil's lowest close since May 2, when oil settled at $116.32

Crude traded as low as $118 a barrel Tuesday before rebounding slightly.

The Federal Reserve, in a move most observers expected, left the fed funds rate unchanged for the second straight meeting, citing the need to balance a weak economy with rising inflation.

Starting last year, the U.S. central bank engaged in a months-long rate-cutting campaign aimed at juicing the markets. It has recently halted the cuts as pressure from inflation mounted. One member of the Federal Open Markets Committee voted to raise rates Tuesday.

"The Fed's decision is just another example of the challenges that the U.S. economy is facing," said Rachel Ziemba, an oil analyst with RGE Monitor.

"With the trajectory of the U.S. and global economies, oil demand will continue to be negatively affected," she added.

Falling demand. Weekly reports from the Department of Energy have indicated demand for crude products is well below what it was a year ago.

Meanwhile the market has been talking about falling demand from Europe and Japan, as well as developing nations such as China, according to Jim Ritterbusch, president of energy consulting firm Ritterbusch and Associates in Galena, Ill.

"We're still responding to both anecdotal evidence and statistical evidence that demand is falling," Ritterbusch said.

Expensive gasoline. High fuel prices have weighed heavily on consumers in the U.S., the world's largest oil consumer.

A daily survey from motorist group AAA showed Tuesday that while average gas prices have fallen for 19 straight days to $3.871 a gallon, they're still more than $1 higher than a year ago. Gasoline prices hit a record high of $4.114 at the pump on July 16.

A recent CNN/Opinion Research poll found that 75% of respondents said prices at the pump are a "financial hardship," up from 60% in April.

"People are just figuring out ways to drive a little bit less," said Brian Youngberg, senior energy analyst with Edward Jones in St. Louis. "They're not taking that extra trip down to the corner grocery store."

Election. Responding to public outcry on high oil prices, Democratic presidential candidate Barack Obama laid out an energy plan Monday that would include releasing 70 million barrels of crude from the Strategic Petroleum Reserve and accepting a "limited amount" of new offshore drilling in the U.S.

Republican opponent John McCain has supported new drilling for several weeks, and was scheduled to tour the Fermi 2 nuclear plant outside of Detroit on Tuesday. Both candidates have pushed for the development of non-fossil fuels.

Edouard. Concerns about supply disruptions in the Gulf of Mexico dissipated as Tropical Storm Edouard failed to reach hurricane strength when it struck the Texas coast, and just grazed vital off-shore oil facilities near Galveston, Texas, according to reports. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.