NEW YORK (AP) -- Oil prices slipped below $125 Friday, yet a number of traders believe that even with flagging fuel demand, the cost for a barrel of oil may be stabilizing, if not ready for another bounce.
By mid-afternoon in Europe, light, sweet crude for September delivery fell $1.34 cents $124.15 a barrel in electronic trading on the New York Mercantile Exchange.
Oil prices fell sharply Wednesday, tumbling $3.98 to settle at $124.44 a barrel, their lowest finish since June 4. Crude has fallen in six of the past eight sessions, and now sits nearly 15 percent below its peak above $147 a barrel earlier this month.
In London, September Brent crude fell 60 cents to $125.84 a barrel on the ICE Futures exchange.
"The reality is that the fall of $20 per barrel has been fast and furious and really the fundamentals of the market that drove pricing to above $145 really have not changed," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore. "Some market participants simply view this as a 'buy' opportunity."
Investors' short covering -- buying back rising securities which they had sold on speculation prices would fall -- was another factor behind the rebound, Shum said.
The U.S. dollar was weaker against the euro and the Japanese yen on Friday, after a U.S. real estate trade group reported that sales of existing homes dropped nationwide by 2.6 percent in June, more than double the decline that had been expected.
As a result, the inventory of unsold homes in the United States inched up to 4.49 million units, representing an 11.1 month supply at the June sales pace, the second-highest level in the past 24 years.
By the afternoon in Europe, the euro rose to $1.5705 from $1.5679 late Thursday in New York, while the dollar fell to 107.13 Japanese yen from 107.29 yen in the previous session.
Investors turn to oil and other commodities as a safeguard against inflation and a weaker U.S. dollar. When the dollar strengthens, it usually has a bearish effect on oil prices.
The rebound in crude prices, however, remained limited by concerns about demand destruction.
"U.S. oil consumption is down on the levels of a year ago and I think there is evidence of some adjustments in response to the high level of oil prices," said David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney.
Americans used 2.4 percent less fuel over the past four weeks than they did a year ago, the latest figures by the U.S. Energy Department's Energy Information Administration show. While that may not sound like much, industry experts say it represents a significant shift by the world's largest energy consumer, especially during America's summer driving season.
Data also showed a bigger-than-expected increase in U.S. gasoline supplies, adding to concerns that drivers are cutting back.
Investors remained on guard over a threat Wednesday by Nigeria's main militant group that it will destroy major pipelines in the oil exporting country within 30 days. The threat -- which only weeks ago might have caused oil prices to spike -- did little to push crude higher.
In other Nymex trading, heating oil futures remained flat at $3.5756 a gallon while gasoline prices gained 1.48 cents to $3.0742 a gallon. Natural gas prices had recovered more than 6 cents to $9.385 per 1,000 cubic feet.
On Thursday, natural gas futures tumbled 46.5 cents to settle at $9.283 per 1,000 cubic feet, its lowest point since March, as a three-week sell-off of that fuel continued unabated.
Natural gas fell after the EIA said in its weekly report that natural-gas inventories rose by 84 billion cubic feet to nearly 2.4 trillion cubic feet last week.
Investors hoping for an uptick in demand -- and a reason to stop the fossil fuel's sharp decline -- were looking for signs of a slower build.
Associated Press writer Gillian Wong in Singapore contributed to this report.