Crude oil traded near a seven-week low after reports showed demand in the U.S. and Japan, two of the three largest oil consuming countries, fell as high prices crimp fuel consumption.

U.S. fuel demand averaged 19.9 million barrels a day last week, the lowest since January 2007, the Energy Department said yesterday. Japan imported 0.7 percent less oil in June than a year ago, the first decline in nine months, the Ministry of Finance said today.

``Oil prices are at a point that will bring about demand- side adjustments that will ultimately cause prices to be at a lower level,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. in Sydney. ``There seems to be an intangible factor here where sentiment has swung quite sharply in the past couple weeks.''

Crude oil for September delivery was at $124.20 a barrel, down 24 cents, at 2:37 p.m. Singapore time on the New York Mercantile Exchange. Yesterday, oil dropped $3.98, or 3.1 percent, to settle at $124.44 a barrel, the lowest close since June 4. Futures have lost 5 percent this week.

Oil prices also fell as the Energy Department report showed that gasoline supplies rose 2.85 million barrels last week. Stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 2.42 million barrels.

Brent crude oil for September settlement was at $125.08 a barrel, down 21 cents, on London's ICE Futures Europe exchange at 2:38 p.m. Singapore time. It dropped $4.26, or 3.3 percent, to close at $125.29 a barrel yesterday, the lowest settlement since June 4.

Fuel Consumption

Demand has declined for three straight weeks, the Energy Department report showed. U.S. fuel consumption averaged 20.3 million barrels a day in the past four weeks, down 2.1 percent from a year earlier, the department said.

Refineries operated at 87.1 percent of capacity last week, down 2.4 percentage points from the week before, according to the department. It was the lowest utilization rate since the week ended May 9.

Refineries were forecast to operate at 89.5 percent of capacity last week, unchanged from the week before, according to the median of analyst estimates in the Bloomberg survey.

Crude-oil inventories dropped 1.56 million barrels to 295.3 million. Stockpiles were forecast to decline 675,000 barrels, according to the survey results.

Oil has tumbled 16 percent from a record $147.27 a barrel on July 11, as a stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption. Prices also fell the past two days as Hurricane Dolly moved away from oil platforms in the Gulf of Mexico.

Rig Evacuations

Energy companies evacuated some oil rigs as a precaution. That cut production in the Gulf by 4.7 percent, the U.S. Interior Department said yesterday.

Companies that carried out evacuations include BP Plc, Noble Corp., Chevron Corp., Devon Energy Corp., Citgo Petroleum Corp. and Royal Dutch Shell Plc.

Oil and other commodities may drop further and the dollar increase if the Federal Reserve boosts interest rates to curb inflation. Philadelphia Fed President Charles Plosser yesterday said higher mortgage costs and continued declines in house prices pose no bar to raising interest rates.

The dollar traded at 107.89 yen at 2:32 p.m. in Singapore, from 107.90 yesterday. It earlier reached 107.98, the highest since June 26. The U.S. currency was at $1.5688 per euro, after yesterday touching $1.5670, the strongest level since July 9.