why crude oil prices drop march 22 2012

why crude oil prices drop march 22 2012 : The price of oil dropped to its lowest level in a week after reports of a slowdown in Chinese manufacturing. Benchmark U.S. crude fell by $2.26 to $105.01 per barrel. It dipped as low as $104.50 earlier in the day, the lowest price since $103.78 on March 15.

Oil prices fell after a London bank said Chinese industrial activity dropped to a four-month low in March. That could slow demand for crude because China's factories are big users of oil.

"Strong Chinese growth is the main reason behind rising oil prices the last couple of years," said Gene McGillian, a broker and oil analyst at Tradition Energy. "As we see slower growth, the thought is that energy demand is going to take a hit."

Brent crude, which is used to price oil imported by U.S. refineries, fell by $1.27 to $122.93 per barrel .

Besides the weak Chinese manufacturing report, oil traders also noted that lower U.S. oil and gasoline demand is pushing down prices. And Saudi Arabia, the world's largest producer, earlier this week pledged to increase exports to help keep a lid on prices.

Oil prices are still high, however, and have pushed up gasoline. The price of retail gasoline rose by nearly 2 cents to $3.88 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. The national average is the highest ever for this time of year, and experts say it could hit $4.25 by late April. Gas is already $4 or more in ten states and Washington D.C.

In other energy trading, heating oil fell by 4.39 cents to $3.1723 per gallon and gasoline futures gave up 3.6 cents to $3.3211 per gallon. Natural gas futrures fell by 7.3 cents to $2.287 per 1,000 cubic feet.

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