Oil touches seven-week low

LONDON (Reuters) - Oil hit a seven-week low on Friday, extending a decline that has knocked more than $20 off prices in two weeks.

U.S. crude was $2.09 lower at $123.40 by 4:15 p.m. and traded as low as $122.50, the lowest since June 5. Brent crude lost $2.05 to $124.39.

Concern that high prices and the slowing U.S. economy will undermine demand have helped oil fall from a record $147.27 on July 11. Technical trading and a short-covering bounce had buoyed prices earlier.

"Potentially, there are some people selling off after a weak bounce," said Harry Tchilinguirian, oil analyst at BNP Paribas.

Oil also fell as the dollar gained against the euro and the yen. Dollar weakness has boosted demand from some investors for oil and strength in the U.S. currency has been a reason to sell crude.

Some analysts said oil could be headed lower still.

Lehman Brothers forecasts that oil has peaked and may fall to $90 by the end of the first quarter of 2009. Jim Ritterbusch of Ritterbusch & Associates said crude could drop to as low as $117 within about a week.

Also pressuring oil, the Organization of the Petroleum Exporting Countries is expected to raise supply in July by 200,000 barrels per day, according to Petrologistics, an industry consultant.

But Russia, the top exporter outside OPEC, is cutting back. Russia has slashed its August oil export plan as oil firms rushed to re-route volumes to domestic refineries, a preliminary export schedule showed on Friday.