Aug.18. In global petroleum market news, oil prices hit a 3-month low Friday on a stronger dollar and a bearish OPEC demand report. Light, sweet crude for September delivery fell USD 1.24 to settle at USD 113.77 a barrel on NYMEX after falling to USD 111.34, its lowest price since May 2 and more than USD 35 — or 24% — below its July 11 trading record above USD 147. In London, September Brent crude fell USD 1.13 to settle at USD 112.55 a barrel. Crude fell after the dollar gained strength against the euro on U.S. data showing that industrial output rose more than expected in July. The euro has tumbled in recent weeks against the American currency amid growing evidence that European economies are slowing. The euro bought USD 1.4675 in trading Friday, down from USD 1.4811 late Thursday. A rising dollar typically pushes oil prices lower as investors who buy crude and other commodities as hedges against inflation start dumping their positions to cut their losses. A stronger greenback also makes dollar-denominated commodities more expensive to overseas buyers, further eroding demand. An OPEC forecast of lower demand also put downward pressure on prices. In its monthly oil report, the cartel predicted world appetite for oil this year overall will fall by 30,000 bpd. While forecasting demand growing by a daily 1 mn bpd this year, and another 900,000 barrels in 2009, the report noted that world demand growth next year will also be "the lowest since 2002," with demand growth from the major industrialized countries actually declining. The OPEC report came two days after the U.S. Department of Energy reported an ongoing drop in U.S. demand for energy as Americans struggle with high costs for gasoline, food and other goods. Oil’s steady decline has continued despite the simmering weeklong conflict between Russia and Georgia over two breakaway provinces. Western leaders worked Friday to persuade Russia to pull troops out of Georgia, but regional tensions soared after a top Russian general warned that Poland could face attack over its missile defense deal with the United States. British oil company BP PLC said Thursday it has resumed pumping gas into the Baku-Tbilisi-Erzurum pipeline that runs through Georgia, but two oil pipelines remained closed. BP's Baku-Supsa oil pipeline was shut as a precaution, and the larger Baku-Tbilisi-Ceyhan line, a key supplier to Western countries, remains shut after a fire earlier this month on the Turkish section of the line. We would like to note that only a few weeks ago, such a clash would almost certainly have sent oil prices soaring. But the market has largely ignored the fighting in Georgia because traders have already priced in the geopolitical risk. Crude's month-long nosedive has also made it harder for bullish traders to spark a rally, despite a possible threat to oil installations. Also weighing on prices Friday was the expiration of September oil contract options at the end of the day, a trading cycle that often increases volatility. Moving forward, we believe that a continued strength story in the dollar could push WTI and Brent below the USD 100/bbl mark, with bearish fundamentals still driving the market.