Source AP ©

Oil prices reverse course to fall

Oil futures went down Monday as concerns about falling demand and rising supplies offset earlier anticipation about an interest rate cut.

Many investors who had jumped into oil futures markets as crude prices were rising are now looking for opportunities to sell. Many found such an opportunity earlier Monday morning when oil rose to near to near $90 a barrel, said James Cordier, president of Liberty Trading Group.

"Right now, the big question is demand," Cordier said.

Several recent reports have suggested domestic demand for oil and gasoline is falling even as OPEC is boosting production.

Light, sweet crude for January delivery fell 50 cents to $87.78 a barrel on the New York Mercantile Exchange.

While the recent trend of oil prices has been mostly down, trading has been volatile. January futures fell $1.95 on Friday after rising $2.74 on Thursday.

"We're covering the same ground and not getting anywhere," said Steve Bellino, senior vice president of energy at MF Global LLC.

At the pump, meanwhile, gas prices fell 2 cents over the weekend to a national average of $3.003 a gallon, according to AAA and the Oil Price Information Service. Gas prices have fallen nearly 11 cents from levels reached in mid-November, when oil appeared set to hit $100 a barrel.

Oil futures have dropped more than $10 from their highs in recent weeks as OPEC increased output and as demand slid in the face of high prices. Analysts who a month ago were predicting new gas price records now see prices falling well below $3 a gallon in coming months.

Some analysts expect oil futures to trade in a range around $90 until more evidence surfaces of either further demand erosion or supply growth. Others believe futures have begun a seasonal move that could take them as low as $70 a barrel.

Supporting prices Monday were a weaker dollar, expectations that the Fed will cut rates on Tuesday, which would likely take the dollar down further and news that fog has closed two Texas waterways used by oil tankers. The dollar's continuing decline against the euro and other currencies again made oil look more attractive to foreign investors.

Other Nymex futures fell Monday. Heating oil for January delivery fell 1.15 cents to $2.4932 a gallon, while January gasoline fell 1.2 cents to $2.257 a gallon. January natural gas futures fell 7.9 cents to $7.076 per 1,000 cubic feet on the Nymex.

In London, January Brent crude fell 51 cents to $88.13 a barrel on the ICE Futures exchange.