Oil heads towards $100 a barrel

LONDON, Sept 2(Agencies) Oil slid towards $100 a barrel on Tuesday, after early reports showed Hurricane Gustav had spared major US Gulf oil facilities. brUS crude fell to $107.17 a barrel by 507 a.m. EDT, down $8.29 from Friday's close. It touched a session low of $105.46, its lowest since April 2. brA US public holiday on Monday meant the New York Mercantile Exchange did not issue an official settlement price. brLondon Brent crude was down $3.46 at $105.95. brAs the hurricane was downgraded to a tropical storm, the market returned its focus to a string of bearish factors, including a softer global economy, weaker demand for oil and a stronger US dollar. brThese had already begun to drive prices down from a peak of $147.27 a barrel hit on July 11. brHurricane Gustav, combined with Russia's conflict with Georgia, which disrupted flows of oil and gas, had halted the slide. brIf it were not for these threats, we would have been testing $100 already, said Mike Wittner, of Societe Generale. brAn upturn in the dollar, plus falls in oil demand in the United States and China, the world's top two energy consumers, look set to exert further pressure on the market. brThe weak dollar contributed to oil's surge this year as investors turned to oil as a hedge. The US currency has shown signs of bottoming out and hit a 10-month peak against a basket of currencies on Tuesday. brMeanwhile another report adds, Crude oil, gold and copper led a drop in commodities in London as Hurricane Gustav spared the U.S. Gulf states the destruction caused by Katrina and Rita in 2005. brThe S&P GSCI index of 24 commodity futures has dropped as much as 7 percent in two days, to the lowest since April 2. Oil is trading at a five-month low, 27 percent below the record $147.27 a barrel reached July 11. brLower commodity prices may help ease inflation, which in the euro zone dropped to 3.8 percent last month from 4 percent. The World Bank expects global growth to slow to 2.7 percent this year from 3.7 percent in 2007. br``We peaked out,'' said Marc Faber, who forecast in June that raw materials would start to fall. ``We'll have to see whether it's a short-term peak or a long-term peak.'' brSlower consumption in the U.S., the world's largest user of oil, would hurt manufacturing countries that are emerging economies, Faber said today from Bangkok in a Blooomberg Television interview. The U.S. is second to China in terms of industrial-metals consumption. brGold for immediate delivery fell as much as $16.28, or 2 percent, to $801.42 an ounce, the biggest decline since Aug. 19. Gold dropped as lower oil prices diminished the appeal of the metal as a hedge against inflation. brThe precious metal, which tends to weaken when the dollar strengthens against the euro, has lost 22 percent from a record $1,032.70 an ounce traded March 17. A decline of more than 20 percent is the common definition of a bear market. brMost commodities are priced in dollars and some investors buy them as a hedge against further weakness in the U.S. currency.br