Sun, Sep 03, 2006 - Page 10 News List

Oil prices tumble as Iran sanctions leave the picture

AFP , NEW YORK

Crude oil futures drop-ped sharply on Friday as markets ruled out the likelihood of immediate sanctions being imposed on major producer Iran, analysts said.

New York's main contract, light sweet crude for delivery next month, slid US$1.07 to close the session at US$69.19 per barrel.

In London, Brent North Sea crude for delivery next month shed US$1.10 to US$69.15 a barrel.

Analysts said the drop in prices was supported by the belief that supplies are ample and diminishing fears about a conflict that could disrupt oil from Iran, the world's fourth-biggest producer of crude.

President Mahmoud Ahmadinejad sent a curt message to global powers on Friday vowing that Iran "will not give up one iota" of its nuclear right after the Islamic republic ignored a UN deadline on Thursday to halt its atomic program.

"The market doesn't seem poised to react" over Iran, Fimat analyst Mike Fitzpatrick said. "Probably because [US] President [George W.] Bush seems to be the only one calling for swift action to be taken against Iran and without a united front, implementing and enforcing sanctions may be slow and difficult."

EU foreign policy chief Javier Solana warned on Friday against making concrete moves on sanctions against Iran while he holds talks with Tehran's chief nuclear negotiator.

"Since we are going to have a period of talks, during this period of talks it would not be reasonable to move on" with sanctions, he said on the sidelines of a meeting of EU foreign ministers in Finland.

The US accuses Tehran of using a nuclear energy program as cover for a drive to make atomic weapons, and has expressed confidence that the UN Security Council can agree economic sanctions this month.

Iran denies the US charges and argues that its nuclear program is purely to provide civilian nuclear energy.

Meanwhile, analysts said the market appeared well supplied as the US summer season comes to a close and refiners begin to stockpile heating oil.

Jason Schenker at Wachovia Securities said next week's US inventory data "is likely to show an even more exacerbated year-over-year increase" in supplies of crude and refined products.

"The driving season is really over with this weekend," he noted, referring to the Labor Day holiday tomorrow.

"We're just looking at a very well-supplied market and slowing economic growth, so demand is expecting to slow while supply is up year over year," he said.

He said a cooling US economy will also mean less demand for petroleum. Data on Friday showing 128,000 new US jobs last month is consistent with growth in the vicinity of three percent or possibly lower.

"Economic growth is slowing if you look to the job report of today," Schenker said.

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