Oil under $60; gas falls 24 cents

By MSN Money staff and wire reports

Oil dropped under $60 to a six-month low on Monday as abundant supplies and fears of slower economic growth would extended a price retreat.

U.S. crude has fallen nearly $19 from its mid-July peak of $78.40, its biggest slide in more than 15 years. The 24% decline was set off as investors' concern faded over Iran and the Atlantic hurricane season proved unexpectedly mild.

That freefall is showing up at the pump as well, with U.S. retail gas prices down roughly 20% since their mid-August peak, according to a survey released Sunday.

The national average for self-serve regular was about $2.42 on Sept. 22, down from about $2.65 two weeks earlier, according to the Lundberg Survey of 7,000 gas stations across the country.

Gas prices peaked Aug. 11 at $3.02 and have dropped about 60 cents since that time. The lowest average price in the survey was notched in Des Moines, Iowa -- $2.07 a gallon for regular. The highest was in Honolulu, at $3.03

Why oil is skidding

The rout deepened last week as speculators fretted over slowing economic growth in the world's top consumer and hedge fund Amaranth Advisors registered billions of dollars in losses.

"You have summer support unwinding, very bad product market support and on top of that the U.S. economic slowdown is becoming more compelling," Eoin O'Callaghan of BNP Paribas told Reuters.

BP's move to restore output at its Alaskan oilfield earlier than expected added to a sense of healthy supply.

The British major said on Friday it would add 150,000 barrels per day of output to Prudhoe Bay in about a week, lifting total production to 400,000 bpd less than two months after it was forced to halve flows due to a corroded pipeline.

Prices have been under pressure as U.S. inventories of distillates climb to their highest in nearly eight years and natural gas stocks swell to record-high levels, assuring consumers of ample winter fuel supplies.

At the same time, investors have begun to fret over the pace of U.S. economic growth -- a worry heightened last week after a key business activity index turned negative for the first time since April 2003, indicating a decline in manufacturing.

OPEC likes $55-$60

But Goldman Sachs cautioned that the market's weakness may be fleeting, as a severe winter could eat into comfortable stocks while delays to new oilfields and refineries may put renewed strain on global capacity by the end of this year.

Even those who say the market may struggle to rebound warn that further losses are likely to be checked soon by members of the Organization of the Petroleum Exporting Countries, many of whom say $50-$60 is a desirable price level.

Saudi Oil Minister Ali al-Naimi said last week that prices were "reasonable," a shift from calling prices "high" that some analysts read as a signal for potential output action.

"OPEC has a very difficult decision to make because if they try and maintain a price support to high then they will exacerbate the downturn for the world next year that we are forecasting," said O'Callaghan.

Geopolitical worries remained on the backburner, with major powers at the United Nations still trying to reach consensus over sanctions on Iran, the world's fourth-largest oil exporter.

Gas prices around the country

The prices below are from a daily survey of up to 85,000 stations compiled by AAA's Fuel Gauge Report.

Gas prices in all 50 states

State	Regular	Premium	State	Regular	Premium
Alaska	$2.96	$3.32	Montana	$2.63	$2.88
Alabama	$2.27	$2.50	North Carolina	$2.31	$2.56
Arkansas	$2.26	$2.54	North Dakota	$2.31	$2.48
Arizona	$2.43	$2.68	Nebraska	$2.29	$2.40
California	$2.77	$2.99	New Hampshire	$2.39	$2.68
Colorado	$2.69	$3.01	New Jersey	$2.36	$2.62
Connecticut	$2.62	$2.91	New Mexico	$2.58	$2.87
District of Columbia	$2.57	$2.82	Nevada	$2.81	$3.07
Delaware	$2.30	$2.55	New York	$2.67	$2.92
Florida	$2.47	$2.72	Ohio	$2.15	$2.38
Georgia	$2.21	$2.48	Oklahoma	$2.14	$2.33
Hawaii	$3.14	$3.38	Oregon	$2.77	$2.97
Iowa	$2.17	$2.39	Pennsylvania	$2.41	$2.65
Idaho	$2.79	$3.03	Rhode Island	$2.51	$2.75
Illinois	$2.46	$2.72	South Carolina	$2.18	$2.43
Indiana	$2.16	$2.38	South Dakota	$2.39	$2.65
Kansas	$2.20	$2.34	Tennessee	$2.26	$2.51
Kentucky	$2.16	$2.42	Texas	$2.26	$2.48
Louisiana	$2.34	$2.61	Utah	$2.80	$3.08
Massachusetts	$2.43	$2.71	Virginia	$2.21	$2.40
Maryland	$2.41	$2.63	Vermont	$2.54	$2.85
Maine	$2.43	$2.70	Washington	$2.77	$3.01
Michigan	$2.20	$2.43	Wisconsin	$2.39	$2.60
Minnesota	$2.20	$2.35	West Virginia	$2.31	$2.54
Missouri	$2.11	$2.32	Wyoming	$2.63	$2.92
Mississippi	$2.29	$2.53	U.S. average	$2.38	$2.62

Source: AAA