Oil price falls 18pc in three weeks

International oil prices have dropped 18 per cent in the past three weeks, and the Automobile Association is picking another drop in petrol prices tomorrow.

The barrel price for US crude oil was US$120.42 this week, the lowest price since May 6 and a US$27 drop from the record high of US$147.27 a barrel on July 11.

New Zealand oil companies have followed the dramatic rise and correction, raising pump prices 8c early this the month and dropping them three times successively last week, bringing the price to $2.07 a litre for 91 octane and $2.12 a litre for 95 octane.

At $1.84 a litre, diesel has only fallen 8 cents a litre from the record highs, due to a higher level of demand for refined diesel globally, keeping prices high, Caltex spokeswoman Sharon Buckland said. She said prolific Chinese construction was sucking up a lot of the available supply, which meant diesel prices "danced to the beat of a different drum".

Automobile Association spokesman Mark Stockdale said crude oil prices had fallen consistently since last week when oil companies last dropped their retail petrol prices, so another drop was due.

He predicted petrol would fall a further 4c a litre by tomorrow.

Diesel prices could come down at least 6c a litre, he said.

Oil companies had gestured warily at the falling New Zealand-US exchange rate, which weakens their purchasing power, but while the Kiwi dollar had fallen by 3c against the US dollar, it had been consistent at just over US74c for a week.

The drop in the barrel price for oil was an indicator of weakening demand in the United States, the largest global consumer market, brought on by the stiff prices for retail petrol, analysts said.

When oil was at record prices, Chakib Khelil, president of the Oil and Petroleum Exporting Countries, was fending off calls to boost production, and blamed US speculators for the price rise.

Yesterday, Mr Khelil started talk about cutting production as he predicted oil could fall further to US$80 a barrel in the long term, but said he did not think it was time to cut output at this point.