Oil ends below $130

By Barani Krishnan

NEW YORK (Reuters) - U.S. crude oil sank for a third straight session on Thursday, closing below $130 a barrel as demand worries outweighed supply woes.

Agricultural markets also slipped on easing fears about crop weather in the U.S. Midwest, which led to a one-session spike on Wednesday. Rejection by Argentine lawmakers of a proposed export tax on soybeans, which had paralyzed the country's soy trade and sent soy markets surging earlier this year, also weighed on Thursday's prices.

Base metals like copper bucked the broader trend in commodities, helped by data showing relative strength in the U.S. housing market.

The Reuters-Jefferies CRB Index .CRB, a popular indicator of commodities performance, fell to a five-week low.

Analysts said high prices, which had attracted money to commodities in recent months, were now driving away investors who felt such inflation was hurting common people's ability to afford basic necessities.

"Consumers are being pinched between higher costs for necessities and lower real wages. The end result is falling demand almost across the board," said Peter Beutel, president of Cameron Hanover, an oil trading advisory.

U.S. crude on the New York Mercantile Exchange, or NYMEX, closed down $5.31 at $129.29 a barrel.

Although oil prices are still up more than 30 percent from the start of this year, this week's three-day loss is the biggest in percentage terms since December 2004. The drop has been a boon to world stock markets, hard-hit by mounting fears over inflation and the health of the U.S. banking sector.