Crude-oil prices fell to a 14-week low Monday on signs the U.S. economic slump will extend into 2009, crimping fuel demand. Oil retreated as a...

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Crude-oil prices fell to a 14-week low Monday on signs the U.S. economic slump will extend into 2009, crimping fuel demand.

Oil retreated as a Bloomberg News survey showed the United States will grow at an average 0.7 percent annual pace from July through December, half the gain in the first half of the year.

Prices rose in early trading after five days of clashes between Russia and Georgia threatened alternative export routes from Azerbaijan.

“It’s become clear that demand is cratering, which is making it hard to rally,” said Rick Mueller, director of oil markets at Energy Security Analysis in Wakefield, Mass.

“It’s hard to imagine that the market will shrug off the potential loss of 1 million barrels a day of pretty good quality crude, but that appears to be the case.”

Crude oil for September delivery fell 75 cents, or 0.7 percent, to settle at $114.45 a barrel on the New York Mercantile Exchange, the lowest close since May 1.

While still up 60 percent from a year ago, futures have fallen 22 percent since their July 11 record of $147.27.

Gasoline for September delivery fell 2.08 cents, or 0.7 percent, to settle at $2.8666 a gallon in New York, the lowest since April 14, and pump prices are following futures lower.

Gas prices falling

Regular gasoline, averaged nationwide, fell 0.8 cents to $3.81 a gallon, AAA said on its Web site.

Pump prices reached a record $4.114 a gallon July 17.

“I think we are looking at a significant change in market sentiment,” said David Kirsch, an energy markets analyst at PFC Energy in Washington, D.C.

“We are really only focusing on the bearish aspects of a dramatic slowdown in demand and increased supplies.”

The decline was compounded as the dollar climbed to its strongest against the euro in more than five months.

The currency’s gain — fueled by speculation the economic slowdown that started in the U.S. is spreading — reduces the need for commodities as a hedge against inflation.

In China, the world’s second-biggest oil consumer, crude-oil imports fell 7 percent to about 3.25 million barrels a day in July, the lowest since December, the Beijing-based Customs General Administration of China said in a posting on its Web site Monday.

“The primary driving factor of the market is the sluggish economy,” said Gene McGillian, an analyst at TFS Energy in Stamford, Conn.

“We are looking for any evidence that the economic contagion in the U.S. and Western Europe is spreading to the Far East, where demand has been strong. The Chinese demand numbers may be a sign that demand is starting to flag in Asia.”

Threat to supplies

Georgia is a key link in a U.S.-backed southern energy corridor that connects the Caspian Sea region with world markets, bypassing Russia.

A fire on the Turkish stretch of the pipeline that ships Azeri Light crude was extinguished Monday after an explosion last week.

“The threat to Caspian oil supplies appears to have been written off,” McGillian said.

“There will have to be a more frightening development in the Caucasus or some other trouble spot to make this market rally.”

With reporting by Aaron Clark and Kathleen Hays in New York and Alaric Nightingale in London. Editors: Joe Link, Theo Mullen