Oil Falls on Weaker Demand

Oil slipped below $72 a barrel on weaker demand and a strengthening US dollar. By early afternoon in Europe, benchmark crude for January delivery was down 70 cents to $71.96 in electronic trading on the New York Mercantile Exchange.

Some analysts are skeptical that demand growth can continue beyond the middle of next year as the impact of massive government stimulus spending begins to ebb.

London-based Capital Economics expects oil to fall to near $50 a barrel by the end of next year on weaker than expected demand and a stronger U.S. dollar. Investors have often bought commodities such as crude this year as a hedge against inflation.

“As the boost from policy stimulus starts to fade and underlying weaknesses reassert themselves, demand should slow again,” Capital Economics said in a report.

“If we are right that the U.S. dollar resumes its recent recovery and fears of inflation and asset bubbles fade, oil prices should drop back next year too.”

Associated Press

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