Oil fell towards $121 a barrel on July 29, touching the lowest price since mid May, as signs of weakening demand outweighed a disruption to Nigerian oil output. Oil has fallen from a record high of $147.27, pressured by signs that record high prices and slowing economies are curbing demand, especially in the United States, the world’s largest oil consumer.

This fall brings oil’s plunge since its peak on July 11 to more than 17 per cent. The last time the market suffered such a big correction was in late 2006, when prices dropped more than 30 per cent from peak to trough during a period of five months. The oil market was in the middle of a correction but prices would bottom out soon.

Opec President recently said oil prices could fall to $70-$80 in the long term, if the US dollar continued to strengthen and geo-political anxieties eased. He was also of the view that Opec should not consider cutting production after oil’s steep two week decline as markets are now balanced.

The world’s five largest fully publicly traded oil companies are expected to, yet again, report record profits due to high oil prices.

Oil prices averaged over $120 a barrel in the second quarter — almost double the level in the same period of 2007 — before rising to a record high above $147 per barrel on July 11.

Analysts predict this will push sector earnings up around 30 per cent in the quarter compared to the same period in 2007, and is likely to attract further criticism from politicians and hard-pressed motorists.

Exxon Mobil Corp, the world’s largest non-government controlled oil company by market value, is predicted to post quarterly net income of over $13 billion. Industry No.2, Royal Dutch Shell Plc is forecast to report a 20 per cent rise in current cost of supply (CCS) net income, excluding one-off items, of $8.3 billion, according to a Reuter’s poll of 9 analysts.

BP Plc is forecast to post a 44 per cent rise in replacement cost (RC) net income, excluding one-offs such as field sales, to $7.7 billion. CCS and RC net income both strip out unrealized gains from changes in the value of inventories, making them comparable with net income under US accounting rules.

The forecast results would be the highest quarterly profits ever for all three companies. Exxon’s result would be a US corporate record, while Shell’s would be a European record, analysts said.

In the New York market, the dollar rose on July 29, as a fall in crude oil price buoyed demand for riskier assets, lifting US stocks as the open. The New York Board of Trade’s dollar index, which measures the dollar’s performance against a basket of six currencies, rose as high as 72.942.

Declining oil prices kept investors away from the euro, despite data showing German price pressures were stronger than expected in July. Investors are worried that further interest rate hikes by the European Central Bank would hurt an already struggling euro zone economy.

French consumer confidence plunged to a record low for the seventh straight month in July, which also weighed on the euro.

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