Cost of a gallon cut as oil price tumbles

Asda, the UK's second-largest supermarket group, cut petrol prices again yesterday as crude oil prices fell to a two-month low on hopes of higher exports from Iraq.

Asda, the UK's second-largest supermarket group, cut petrol prices again yesterday as crude oil prices fell to a two-month low on hopes of higher exports from Iraq.

The cut by Asda, its third in three weeks, came as crude oil prices in New York fell as low as $35.65 a barrel in afternoon trade. This is their lowest level since April and more than $6 off the record high of $42.45 reached on 2 June.

Traders had feared renewed attacks on Iraqi oil facilities ahead of the transfer of power, which had been scheduled to take place today. But Monday's surprise handover of sovereignty triggered a sharp sell, with prices dropping $1.31 a barrel.

David Thurtell, a commodity strategist with Commonwealth Bank of Australia, said: "The early handover is reducing fears of terrorist disruptions to oil supplies - fears that had added at least several dollars to prices."

Prices had already been falling thanks to slowing demand from China and the decision by the producers' cartel Opec to increase supply.

However, analysts warned prices could quickly go back up again in the event of a major attack on oil facilities. "If the situation in Iraq does worsen substantially, exports could be curtailed far more than has occurred to date and prices could spike over $40 again," analysts at PFC Energy said.

Falling prices will come as a relief to governments on both sides of the Atlantic, which are under pressure over rising petrol prices.

The latest price cuts at Asda, which comes into effect from tomorrow, will take a litre of unleaded petrol and diesel to 77.9p at its 150 filling stations. Previous cuts by Asda have led to similar price falls among its rivals. Asda said: "The price of a barrel of US light crude ended last night at $36.24, down from its record May high and we are keen to pass these savings on."