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Oil price dips on demand worries

World oil prices fell almost US$3 in Asian trade yesterday on demand worries as Wall Street’s financial meltdown extended to Europe, triggering fears of a global slowdown, dealers said.

In afternoon trade New York’s main contract, light sweet crude for delivery next month, sank US$2.99 to US$90.89 a barrel.

Brent North Sea crude for next month fell US$2.71 to US$87.54 from US$90.25 on Friday in London.

“I think it’s just sort of continuing the steepening gloom you are seeing,” said Jason Feer, vice president of energy market analysts Argus Media in Singapore.

He said that in the absence of weather or political factors to influence oil prices, investors “are concerned about the economic issues.”

On Sunday, BNP Paribas announced it is taking control of ailing finance group Fortis’s operations in Belgium and Luxembourg, in a deal that will make Belgium the largest shareholder in the French bank.

Germany also sealed a public-private rescue plan for the country’s fourth biggest bank Hypo Real Estate as the government extended a blanket guarantee for all personal bank deposits to avert panic withdrawals.

The announcements came on the eve of a meeting of European finance ministers in Luxembourg. They will seek to flesh out broad plans for restoring confidence in the crisis-struck banking system, agreed to over the weekend by Europe’s biggest economic powers.

“The risks of a severe international economic slowdown, possibly extending to a recession in some developed economies, have increased as a result of the recent strains in the international financial system,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

“If there is a severe downturn in the international economy, oil prices could prove weaker than forecast,” he said.

French leaders scrambled on Friday to reassure consumers, voters and investors after the official statistics agency warned that the eurozone’s second largest economy had slipped into recession.

Oil prices have dropped sharply from record high levels above US$147 reached in July, on concerns that demand is slowing, dealers say.

Iranian Oil Minister Gholam Hossein Nozari said on Saturday that a price below US$100 for a barrel of crude oil was “unsuitable.”

“An oil price of less than US$100 is unsuitable for anyone, either for producers or for consumers,” Nozari told reporters on the sidelines of a gas export conference.

He did not elaborate.
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