Oil prices tumbled to six-month lows below 97 dollars on Thursday, as the dollar rallied and the likelihood of a sharp global economic slowdown loomed over demand growth, traders said.
Oil prices tumbled to six-month lows below 97 dollars on Thursday as the dollar rallied and the likelihood of a sharp global economic slowdown loomed over demand growth, traders said.
Prices had risen earlier in the day as Hurricane Ike headed toward key energy facilities on the southern US coast and after OPEC on Wednesday reduced output to curb falling prices, they said.
Brent North Sea crude for delivery in October dropped to 96.99 dollars a barrel on Thursday -- its lowest level since March 5. It later recovered to 97.30 dollars, down 1.67 dollars from Wednesday's close.
New York's main contract, light sweet crude for October, slid 1.96 dollars to 100.62 dollars.
"Crude oil futures slipped further ... as the market focused on demand concerns and the strengthening dollar," said Sucden analyst Michael Davies.
A strong dollar makes goods, such as oil, priced in the US unit more expensive for foreign buyers, dampening demand. The euro on Thursday slid below 1.39 dollars for the first time in a year on heightened concerns about a weak European economy.
Concerns about oil use in a slowing global economy were meanwhile highlighted by the latest monthly report from the International Energy Agency (IEA), which cut its estimate for demand growth this year by 100,000 barrels per day and for 2009 by 140,000 bpd.
The IEA monthly report, published Wednesday, highlighted shrinking oil demand in North America, saying consumers there were cutting back energy use in response to high prices.
The same day, the US Department of Energy said that stockpiles of distillates, which include heating fuel, had dropped by 1.2 million barrels in the week ended September 5. The consensus forecast was for a bigger decline of 2.2 million barrels.
Distillates are being watched closely by the market ahead of the northern hemisphere winter.
With oil prices falling below 100 dollars this week, the oil producers' group OPEC decided to cut production to prevent a further drop.
"It looks like they are willing to defend 100 dollars (as a floor)," Mike Wittner, an analyst at Societe Generale, commented following OPEC's decision.
Oil prices topped a record 147 dollars in July but have since fallen some 30 percent, dropping below the symbolic 100-dollar mark for the first time in five months on Tuesday.
The Organization of Petroleum Exporting Countries reacted to the fall by cutting its total daily output by 520,000 bpd.
Oil prices had risen in Asian trading on Thursday as Ike strengthened to a Category Two storm in the Gulf of Mexico and headed toward the southern US coast after ravaging Cuba and the Caribbean.
In anticipation of Ike, Anglo-Dutch oil giant Shell evacuated personnel from offshore installations. The bulk of US oil refineries are in the Gulf of Mexico.
Elsewhere, British Prime Minister Gordon Brown confirmed that he would host a summit of oil producer countries and consumers on December 19, warning that the world must move away from the "dictatorship of oil."
Date created : 2008-09-11