Oil falls on weak U.S. demand

By Matthew Robinson

NEW YORK (Reuters) - Oil fell on Thursday as Nigerian supply concerns eased, the dollar firmed and U.S. demand showed further signs of weakness.

U.S. crude settled 94 cents lower at $112.52 a barrel, extending losses into a third straight day. London's Brent fell 86 cents to $110.50 a barrel.

Oil has fallen from record highs near $120 hit last month as demand in top consumer the United States sags under the weight of surging fuel prices and wider economic problems.

U.S. oil demand fell 7 percent in February compared with year-ago levels, according to a report from the U.S. Energy Information Administration released this week.

Gasoline use in California -- the biggest U.S. market for the fuel -- fell 4.5 percent compared with 2007, the state reported. A U.S. government report released on Wednesday showing a big build in U.S. crude oil inventories also helped weaken prices.

"Demand destruction is definitely going on. I have got to believe that gasoline demand is coming under tremendous downward pressure. People are more reluctant to take longer drives," said Nauman Barakat, senior vice president at Macquarie Futures USA.

"Gas oil has been the prime mover in the market and it is getting smoked today."

London gas oil prices tumbled after a rush to fresh records over the past week due to a two-day strike at Scotland's Grangemouth refinery, which also forced some North Sea oil production to be shut in. Supply worries have eased as the refinery restarted.