Print

Mail

wiki links

Oil prices sag on weak demand and US gas stockpiles

Oil prices fell nearly a US dollar on Friday at the end of a week in which crude futures have been oppressed by weaker demand for energy and the healthy stockpiles of US gasoline.

New York's main contract, light sweet crude for delivery next month, dropped US$0.92 to close at US$68.53 a barrel.

In London, Brent North Sea crude for July delivery shed US$0.99 to US$68.68 a barrel.

In volatile trade on Thursday, crude futures had risen as geopolitical tensions outweighed fears of a global economic slowdown caused by rising inflation.

Iran, the world's fourth-biggest crude producer, is locked in a war of nerves with Western powers led by the US which are trying to rein in its nuclear program.

Prices had risen earlier on Friday owing to "many potential problems still ahead," said Victor Shum, a Singapore-based analyst at energy consultancy Purvin and Gertz.

"These issues over Nigeria and Iran are not resolved," Shum added.

Civil unrest against foreign-owned oil installations in Africa's biggest crude producer have cut Nigeria's oil exports by some 20 percent this year.

With the US summer driving season around the corner, Shum added that gasoline, or petrol, demand was still a concern despite increased stocks over the past three weeks.

"There are concerns over gasoline demand and the potential hurricane season," he added.

The Atlantic hurricane season, starting next month, will be closely watched after Hurricane Katrina last year devastated oil refineries and rigs in the US Gulf Coast region, sending oil prices to then-record highs.

At the start of this week, crude futures dived as traders absorbed forecasts of weakening demand for energy, on expectations that economies will weaken in the face of higher prices.

They recovered a touch as dealers seized on the supply concerns in Iran and Nigeria, but fell sharply on Wednesday on news of buoyant US gasoline stocks.

"Obviously, recent selling may be an expression of relief that gasoline inventories are beginning to replenish, but the market is hardly out of the woods on that score yet," Fimat analyst John Kilduff said.

"The next important refinery installation to experience difficulties could erase these losses in a hurry," he said.

Kilduff added that the tensions over Nigeria and Iran had not gone away.

"Even OPEC's acting secretary-general Mohammed Barkindo said today that oil prices would not fall until anxiety over geopolitical tensions eases," he said.

Market attention is likely to start switching to the next meeting of the Organization of Petroleum Exporting Countries, being held in the Venezuelan capital Caracas on June 1.

Saudi Foreign Minister Prince Saud al-Faisal, whose country is the kingpin of OPEC, pledged in Washington on Thursday to work for lower oil prices but said it was "weird" they had risen so high with a surplus of crude available.
This story has been viewed 1826 times.