Oil Falls More Than $3 on Reports of European Economic Weakness

July 7 (Bloomberg) -- Crude oil fell more than $3 a barrel amid signs economic growth is slowing across Europe because of record commodity prices, which may curtail energy demand.

Oil dropped for the first session in four as German production, adjusted for seasonal swings, fell 2.4 percent from April, the biggest decline since February 1999, and the index of U.K. manufacturing production unexpectedly decreased to the lowest since September, slipping 0.5 percent from a month ago.

``There has been a lot of focus on how weak the U.S. economy is without necessarily recognizing that the European economy may be weakening, the Japanese economy may be weakening,'' said Tim Evans an energy analyst for Citi Futures Perspective in New York. ``It's not only about the U.S.''

Crude oil for August delivery fell $3.88, or 2.7 percent, to $141.41 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil reached a record $145.85 on July 3. U.S. markets were closed during the Independence Day holiday July 4. Prices have more than doubled in the past year.

Earlier, oil declined as much as 4 percent as the dollar rose to the highest against the euro in a week amid speculation that leaders from the Group of Eight industrialized nations may signal support for the dollar and address high energy prices.

President George W. Bush said yesterday that ``the U.S. believes in a strong-dollar policy.''

The euro fell to $1.5611 against the dollar, the lowest since June 25, before trading at $1.5728 as of 2:35 p.m. in New York.

``Whenever the dollar strengthens, that makes commodities more expensive for everyone else in the world,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``It makes them less willing to buy oil.''

G-8 Summit

Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. will also likely consider the effect of high energy prices on the global economy at their three-day summit in Japan.

Italian Prime Minister Silvio Berlusconi said today that deposits required to trade oil futures should be raised to discourage speculation, amid fears by ``some'' G-8 leaders that oil prices will reach $200 a barrel.

Also pressuring prices were comments by Iranian Foreign Minister Manouchehr Mottaki on CNN yesterday that talks about its nuclear program are ``in a new environment'' and ``new approaches'' with the U.S. are possible. Speculation of an attack on Iran that could disrupt exports from OPEC's second-largest producer helped push oil to a record last week.

Iranian Talks

Iran's nuclear program is an ``unalienable right,'' President Mahmoud Ahmadinejad said today, encouraging all countries to use atomic power to meet their energy needs. He spoke with Radio Televisyen Malaysia, the state-run broadcaster and Bernama, the official news agency in Kuala Lumpur. He is attending a summit of the Eight Islamic Developing Countries.

Heating oil for August delivery fell as much as 4.1 percent today, and gasoline futures were down as much as 3.8 percent.

The fewest Americans in three years may have traveled over the July 4th weekend as record gasoline prices and a slowing economy forced consumers to curtail spending, according to AAA, the largest U.S. motoring group. The number of people taking trips of at least 50 miles (80 kilometers) from home over the holiday weekend will fall 1.3 percent to 40.5 million, AAA said.

Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to a record $4.108 a gallon, AAA said today on its Web site.

``Obviously, there's some selling pressure here, some profit taking going on,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``The gasoline and heating oil are pretty weak.''

Brent crude oil for August settlement fell $2.76, or 1.9 percent, to $141.66 a barrel on London's ICE Futures Europe exchange. Futures climbed to a record $146.69 on July 3.