Oil prices briefly fell below US$60 for the first time in six months yesterday amid signs of growing petroleum inventories and easing worries about potential supply disruptions.
"Hedge funds and investors have been bailing out because geopolitical tensions have eased and they also realize that inventories are high during this period of seasonally weak demand at the end of summer," Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Light, sweet crude for November delivery fell as low as US$59.94 a barrel in Asian electronic trading on the New York Mercantile Exchange -- the lowest in intraday trading since March 13 -- before rising in midafternoon trading to US$60.03, down US$0.52 from Friday's close.
November Brent crude on London's ICE Futures exchange fell US$0.45 to US$59.96 a barrel.
Oil prices have dropped more than 23 percent since hitting a record US$78.40 in mid-July due to a combination of factors: ample global inventories, receding worries about the Atlantic hurricane season, easing concerns about supply threats from Iran and Nigeria and signs of economic weakness in the US, which would restrain energy demand.
"But as long as there is limited excess production capacity and limited refinery conversion capacity, the market will still be prone to periodic price spikes," Shum predicted.
Oil prices have fallen since the beginning of the month on the lack of developments in the standoff between the UN and Iran, who defied the UN's Aug. 31 deadline to stop enriching uranium that could be used to produce nuclear weapons.
The high prices in July and last month were largely fueled by concern over the possibility that Iran could disrupt oil supply if sanctions were imposed or if the monthlong conflict between Lebanon and Israel escalated.
Nigeria, Africa's largest crude oil producer, was also beset by troubles, including kidnappings of oil workers and a strike by workers' unions.
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