Price Of Oil Dips; Latest Terror Plot Could Mean Less Demand

Crude oil prices fell nearly $2 a barrel Thursday as thwarted airplane attacks led many carriers to cancel flights, which could mean dampened jet fuel demand and weaker consumer confidence.

NEW YORK (AP) - Crude oil prices fell nearly $2 a barrel Thursday as thwarted airplane attacks led many carriers to cancel flights, which could mean dampened jet fuel demand and weaker consumer confidence.

Light, sweet crude for September delivery dropped $1.95 to $74.40 a barrel in early afternoon trading on the New York Mercantile Exchange.

Gasoline futures dropped more than 11 cents to $2.0615 a gallon, while heating oil futures fell more than 6 cents to $2.044 a gallon.

On Thursday, British authorities said they had stopped a terrorist plot to blow up several aircraft in flight between the United States and the United Kingdom.

European carriers canceled flights to Britain, where airports were experiencing massive delays. There were delays in the United States, too, amid heightened security.

Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York, said oil prices were down on security concerns.

''It revives fears, and causes people to cut travel plans, which has a contracting effect on petroleum demand,'' Bentz said.

Bentz noted that oil prices were headed lower anyway as traders took profits from recent price jumps; crude actually hit its lowest price in overnight trading before news of the foiled attacks emerged.

''This is a correction in the uptrend,'' he said, adding that crude could fall as low as $73 a barrel before bouncing back. ''There are too many other factors that are so much more supportive ... and will keep prices up.''

Prices continue to be affected by supply disruptions in Nigeria due to civil unrest; BP's Alaskan pipeline being shut down because of corrosion; the standoff between the United Nations and Iran over the nuclear program of OPEC's No. 2 oil producer; and fighting in the Middle East between Israel and Hezbollah.

The average U.S. retail gasoline price rose a couple cents after BP's announcement, but has hovered around $3.036 a gallon for regular unleaded since then.

Unleaded gasoline prices on the West Coast, where refiners get about 30 percent of their oil from Alaska, have risen more than in the rest of the country, but the bigger jumps have been in diesel fuel. In Washington and Oregon, diesel fuel prices were at the states' record highs, at $3.347 a gallon and $3.245 a gallon, respectively.

BP PLC is in the process of shutting down 400,000 barrels of daily oil production - about two-thirds of which belongs to ConocoPhillips and Exxon Mobil Corp. - at Prudhoe Bay in Alaska. The company said, however, that it would decide Friday if it can maintain half of its normal production during repairs.

Natural gas futures fell 9.1 cents to $7.51 per 1,000 cubic feet. The Energy Information Administration reported Thursday that 12 billion cubic feet of natural gas was removed from storage last week, when scorching temperatures caused U.S. power use to hit record levels.

In Nigeria, officials said gunmen seized two foreign oil workers Thursday in the surge of violence targeting the petroleum industry in Africa's oil giant, just two days after four foreign oil workers were kidnapped during a raid on a supply vessel owned by a Norwegian shipping firm.

Southern Nigeria, where most of the nation's crude is pumped, has seen violence against the petroleum industry rising. The kidnappings and attacks have forced a nearly 20 percent reduction of Nigeria's usual 2.5 million barrel daily production.

On Wednesday, the U.S. government reported drops in crude, gasoline and distillate fuel inventories. Crude inventories are still more than 4 percent above year-ago levels, but gasoline and heating oil inventories are only within a percent of where they were last year.

U.S. crude inventories are near five-year highs, but the Organization of Petroleum Exporting Countries' spare capacity is tight _ about 1.1 million to 1.3 million barrels a day, mostly in Saudi Arabia, the EIA estimated earlier this week.

More in Energy