NEW YORK – The price of oil is headed for its biggest monthly decline since December 2008.
Benchmark U.S. crude has dropped nearly 16% so far in May. There are growing expectations that the world won't use as much oil this year as previously expected. On Wednesday, the futures contract fell $2.99, or 3.3%, to $87.78 as global stock markets also sank.
Europe's financial crisis is the most immediate concern, but there have been plenty of signs of weaker demand.
Analysts point to weak U.S. jobs numbers and a slowdown in China's manufacturing sector. The U.S. and China are the biggest oil consumers in the world.
Earlier this year, energy economists mostly agreed that world oil demand would hit a new record in 2012, probably around 89 million barrels per day. But with demand not growing in China and declining in the U.S., those expectations are starting to change.
"I wouldn't be surprised if demand was lower this year," said Michael Lynch, president of Strategic Energy & Economic Research.
When record demand was predicted earlier this year oil prices rose, now that the demand for oil is dropping the price is dropping as well. The price of oil has nothing to do with speculators.
Supply and demand.