The oil bears' case has strengthened.

Oil failed to rally Wednesday despite a government report indicating a draw in U.S. gasoline stocks, on concerns a slowing global economy will reduce global oil demand growth.

Oil closed down 59 cents to $118.58 per barrel. Further, oil also at one point in Wednesday's session fell to $117.25 per barrel, or to a level more than 20% below the July 11 record of $147.27. Technical analysis enthusiasts view a more than 20% price decline as a bearish signal -- a sign that the price of a stock / commodity / market is likely to trend lower.

In addition, oil bears could point to new oil community analysis to support their argument that oil prices are headed lower. Dennis Gartman, publisher of the Gartman Letter, an investor newsletter, told CNBC Wednesday he has closed his oil-long positions and is out of the oil trade entirely. Gartman believes oil could fall below $80 per barrel.

Is the oil 'bubble' bursting?

A drop substantially below $100 would suggest oil's move to near $150 was a bubble. Energy Trader Jim Dietz told BloggingStocks Wednesday he doesn't get caught up in those who try to structure the debate: he just watches oil demand statistics.


"I just watch the oil usage data, domestic and international. And that's demand data, not talk of demand data. There's a difference. This oil market and the rise up to $147 has been driven by oil demand increases. Right now we have real demand declines in the U.S. and slowing demand growth consumption in Asia, so that means we're headed lower," Dietz said. "When you start talking about words like 'bubble,' pretty soon you're rooting for the words and not watching the data, and that's the surest way to lose your shirt in this market."

Dietz added that he was presently short with oil and unleaded gasoline, with monthly contracts.

U.S. fuel demand averaged 20.1 million barrels per day for the four weeks ending August 1, 2008, down 2.6% from a year ago, according to U.S. Energy Information Administration data. U.S. fuel demand has declined on a year-over-year basis for more than 4 months, or roughly in-step with gasoline's surge over $4 per gallon earlier this year.

Oil Analysis: For this oil market, the devil, to paraphrase energy trader Dietz, is in the oil demand details -- the oil demand data. And oil's recent price move supports Dietz's operational methods: oil's record move higher began to stall at the first sign of gasoline consumption declines in the U.S. Oil's price decline continued as it became clear in subsequent weeks that the gasoline use declines reflected permanent changes by motorists, not just a temporary cut back; lower oil consumption growth in Asia has added to the selling pressure.