NEW YORK - Oil prices plunged to a three-month low Monday, briefly tumbling below $120 a barrel in another huge sell-off after Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.
Crude's steep drop - prices fell more than $5 at one point during the day - dragged down other commodities from corn to copper and mimicked the big nosedives of the past three weeks, adding to growing beliefs that the oil bubble is at least temporarily deflating.
'What this means is that we're going to see some more relief at the pump. We're probably looking at another 10 cents of downside in retail gas prices,' said Tom Kloza, publisher and chief analyst at Oil Price Information Service in Wall, N.J. A gallon of regular gas fell on average about half a penny overnight to $3.881.
Also weighing on oil prices Monday was a report by the Commerce Department that consumer spending after adjusting for inflation fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors' expectations that a U.S. economic slowdown is sharply curbing U.S. demand for fossil fuels.
Light, sweet crude for September delivery fell $3.69, or 2.9 percent, to settle at $121.41 a barrel on the New York Mercantile Exchange. It was crude's lowest settlement price since May 5. Earlier, prices plummeted to $119.50, the lowest level since May 6. Crude has now fallen in six of the last nine sessions and has shaved 18 percent off its trading record of $147.27 reached July 11.
The dramatic dive came after traders learned that Edouard, aiming for the coasts of Texas and Louisiana, likely would not damage offshore oil and natural gas drilling platforms that sit in the storm's path.
Natural gas futures also fell sharply, dropping 66.3 cents, or 7.1 percent, to settle at $8.726 per 1,000 cubic feet. And gasoline futures fell 8.41 cents, or 2.7 percent, to settle at $3.0002 a gallon. Other commodities including gold, copper, corn and soybeans also traded lower.
'That has taken a lot of pressure off the market. It looks like the thinking is that we dodged another bullet,' said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
Still, oil market traders expressed surprise that a potential hurricane in the Gulf coupled with escalating tensions with Iran didn't send prices higher - an almost certainty just a few weeks ago.
'Any market that really doesn't respond to seemingly bullish news is often a tip off that we're going lower,' said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.