Record Prices Curb U.S. Fuel Demand

Crude oil fell on signs that U.S.and Europe fuel consumption is dropping because of a slowing economy and record energy prices. Energy and metals have become attractive in the past year to those seeking to offset the dollar's fall against the euro. Speculators were unable to hold last week's new highs, indicating that the rally may be over for now. We might be headed for $120 in the near term.

Crude oil for July delivery fell $3.34, to settle at $128.85 a barrel at 2:53 p.m. on the New York Mercantile Exchange. It was the biggest one-day drop since April 29. Futures reached $135.09 on May 22, the highest since trading began in 1983, and have doubled over the past year.

Brent crude oil for July settlement declined $4.06, to settle at $128.31 a barrel on London's ICE Futures Europe exchange, the biggest one-day drop since March 31. The contract touched a record $135.14 on May 22.

After failing to break through $135 decisively last week, it appears crude reached a resistance line there... High energy prices are having a substantial impact on the economy and potentially on demand ... The euro reversed gains versus the dollar after reports showed German consumer confidence fell more than economists forecast and French business confidence declined to the weakest in more than two years in May.

The euro fell to $1.5718, from $1.5770 yesterday, after rising to $1.5818, the highest level since April 24. The peak U.S. gasoline consumption period lasts from this past weekend's Memorial Day holiday until Labor Day in early September, as Americans take to the highways for holidays...