Oil price strikes seven-month low

19th May 2010, Comments 0 comments

The price of oil fell sharply Wednesday, hitting the lowest level in over seven months due to a strong dollar and concern about the impact of the eurozone crisis on energy demand, traders said.

Official data revealing falls in US energy stockpiles lent a small amount of support.

New York's main contract, light sweet crude for delivery in June, plunged to 67.90 dollars a barrel -- the lowest level since September 30, 2009.

It later recovered to 68.63 dollars, down 78 cents from Tuesday.

London's Brent North Sea crude for July sank 1.29 dollars to 73.14 dollars.

Stock markets slumped globally on Wednesday and the euro dropped to a four-year low, hit by unexpected German trading controls and stubborn eurozone debt concerns.

The European single currency nosedived to 1.2144 dollars in early trade, hitting its the lowest point since April 17, 2006.

"The market remained under pressure with the US currency rallying to new highs against the euro," said VTB Capital analyst Andrey Kruchenkov.

"Risk sentiment remained sour, still dictating direction to the broader commodities market."

A stronger US currency makes dollar-priced oil more expensive for holders of weaker currency units, denting demand and pushing prices lower.

The single European currency has remained weak despite eurozone finance ministers putting together a trillion-dollar (750-billion-euro) debt rescue package for the region.

Investors remain worried that austerity measures announced by Greece and other debt-laden eurozone countries could hurt growth and consumption in Europe, weighing on energy demand.

"The ongoing concerns over European debt are still very much lingering in the minds of every investor," said Serene Lim, a Singapore-based oil and gas analyst with ANZ bank.

"As such, the dollar has increased and that has also weighed on oil prices."

Oil producer Libya on Wednesday expressed concern about the slump in prices but said there was no need for an extraordinary meeting of OPEC to discuss the situation or make changes to the cartel's official output target.

"We are a bit concerned about the movement in the market," the head of Libya's National Oil Company told AFP.

"It's too early" to talk about an extraordinary OPEC meeting, added Shukri Ghanem. "We'll wait for a while," he added.

Member countries of the Organization of Petroleum Exporting Countries -- which pumps about 40 percent of the world's oil -- have publicly expressed a desire for crude prices to stay above 70 dollars a barrel.


© 2010 AFP

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