Oil prices dipped below $59 a barrel Friday, ending a week in which crude has fallen more than 10% on growing pessimism about the economy and also the well being of companies about to report second-quarter earnings.
Benchmark crude for August delivery fell more than 2%, or $1.28, to $59.13 a barrel on the New York Mercantile Exchange, but at one pointed traded as low as $58.72.
The International Energy Agency said Friday it expects energy demand to drop 2.9% this year.
The IEA said economic recovery in developing countries will help counter the effects of the recession in the West and Japan. It expects demand to rise 1.7% in 2010.
Corporate earnings that will be released over the next several weeks will be a good indicator of how well the global economy has fared this year and whether energy use could diminish further.
After falling close to $30 a barrel, crude prices had been rising steadily and peaked last week above $73. But dismal jobs numbers suggested energy use will be muted for some time, and prices have tumbled 19% since then.
"All the focus is on demand," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets. "The second-quarter earnings season is going to be very important for crude. If we see disappointments there, people will say, 'We've gone too far, too fast."'
Aluminum maker Alcoa started off earnings season on Thursday by reporting a narrower-than-expected loss. Aluminum is a key ingredient in the construction market, and increased activity in that sector is one gauge of economic health, and by extension, demand for oil.
Next come reports from major well known brands like Colgate Palmolive, PepsiCo and Johnson & Johnson.
"These companies have a good feel for how demand is around the world," Moltke-Leth said. "What they say is going to be important for the near-term outlook for oil."
If retail sales of household items are falling, it is likely that crude and gasoline sales will continue to fall. Americans, who consume more gasoline than anyone else, have slashed their driving and gasoline prices have followed.
In other Nymex trading, gasoline for August delivery fell 2 cents to $1.644 a gallon and heating oil for August delivery fell 1.6 cents to $1.5180. Natural gas for August delivery slipped a penny to $3.398 per 1,000 cubic feet.
In London, Brent prices fell $1.19 to $59.91 a barrel on the ICE Futures exchange.