Oil fell briefly below $100 early Tuesday as traders anticipated a likely continued rise in weekly oil inventories and gasoline supplies.

Oil fell $1.68 to $99.90 per barrel after traders calculated that the U.S. Energy Information Administration's weekly Wednesday data will show at least a modest rise in oil inventories, for the seventh week in the past two months. It recovered and is trading at $101.80 as of noon.

Inventories in the United States are rising, which is bearish for oil prices, and good news for U.S. consumers, who have had to deal with record oil and gasoline prices over the past six months. Jim Dietz, independent energy trader, said last week's attack on an Iraqi oil pipe and no gain in weekly U.S. inventories created a temporary $7 spike in oil, and he now expects oil to resume a downward path, given the aforementioned bearish fundamentals. Dietz added he is currently short oil with monthly contracts.

Slackening oil demand

A slowing U.S. economy means the nation will use less oil than earlier economic models had projected. Further, oil use typically is at its lowest level of the year in Q2 in the United States, as furnaces operate less as the heating season ends and spring begins.

In addition, Dietz said slack U.S. gasoline demand is also pushing oil lower. Gasoline demand typically rises in the spring and summer, as the vacation season begins. However, weekly gasoline sales have been flat or lower for more than three weeks, as consumers cutback gasoline consumption to offset impact of $3.20-$3.30 per gallon average unleaded regular gasoline prices, he said. (In some high-cost U.S. areas, unleaded regular is already considerably higher than the above price range.)

Still, despite flat weekly gasoline sales to-date this spring, Dietz said the U.S.'s barely-adequate refining capacity is likely to add 20-25 cents to the price of gasoline, with some high-cost areas seeing a 30-40 cent jump. Additional gasoline consumption cutbacks in the U.S. could slow that increase, Dietz said, but the reduction would have to last the length of the summer season to act as a downward pressure on prices.