Oil extends slide on demand concerns

NEW YORK (Reuters) - Oil prices slipped on Monday as demand worries due to surging fuel costs outweighed supply concerns caused by a tropical depression in the Caribbean.

U.S. crude fell 34 cents to $114.25 a barrel by 1:22 p.m. EDT (6:22 p.m.) after falling more than 5.4 percent on Friday in the largest one-day slide since December 27, 2004. Brent crude traded down 31 cents to $113.61 a barrel.

Oil has tumbled from a record high over $147 struck on July 11 on growing signs demand in the United States and other consumer nations has faltered due to surging fuel costs.

"All the factors that have motivated the price down are still intact," said James Crandell, analyst for Lehman Brothers.

"(There are) demand concerns and also increasing supply."

The U.S. National Hurricane Center said an area of low pressure over the central Caribbean Sea formed into Tropical Depression Seven and could become the season's latest tropical storm later Monday.

According to forecast tracks, two of six forecasters expect the system to head northwest into the Gulf of Mexico, where there is a high concentration of U.S. oil and natural gas production. Four other forecasts show the system headed toward Belize or the Yucatan Peninsula, however.

Worries over the storm helped counter strength in the dollar earlier Monday. Investors have used commodities as a hedge against inflation and the weak dollar this year.

"Judging from the dollar's gains, crude oil should be down a lot, but that is not the case as a developing storm in the Carribean Sea appears (to be) supporting oil," said Phil Flynn of Alaron Trading in Chicago.