Oil prices in dramatic slump

5th May 2011, Comments 0 comments

World oil prices spiralled lower on Thursday as traders fretted over more downbeat economic data and fears of weak energy demand in the United States and elsewhere, analysts said.

Brent North Sea crude for delivery in June slumped $6.71 to $114.48 per barrel, after hitting $112.55 -- the lowest point since March 17.

And New York's main contract, light sweet crude for June, nosedived $6.14 to $103.10 a barrel, having earlier touched $101.08 -- which was a level last witnessed in mid-March.

"Crude took a nose dive, with demand concerns outweighing recent supply fears, coinciding with risk aversion across the board amid weak macroeconomic numbers," VTB Capital commodities analyst Andrey Kryuchenkov told AFP.

"The plunge was also accelerated by heavy technical selling ... and a strong dollar rebound," he added.

New US unemployment claims skyrocketed last week to an eight-month high, government data showed Thursday in a report that sank recovery hopes on the eve of the key April employment report in the biggest global oil consuming nation.

New claims for US unemployment insurance benefits leaped to a whopping 474,000 in the week ending April 30, a 10 percent increase from the prior week, the Labor Department reported.

The seasonally adjusted weekly indicator has increased in three of the four weeks in April. It was the highest claims number since mid-August 2010's 488,000.

The rise surprised most analysts who had forecast a decline, to 400,000 claims, and sent a shudder through the markets as investors fretted about a slowdown in the world's largest economy.

CMC Markets analyst Michael Hewson added that oil was also under heavy selling pressure from fears of slowing economic growth around the world.

"Poor economic data out of the US and rising interest rate policies in China and India have prompted fears of growth slowdowns across the global economy, and therefore drops in demand, sending oil lower," he added.

Oil had already dived on Wednesday after a stronger-than-expected increase in US petroleum stockpiles sparked initial worries about demand in the United States, the world's biggest oil-consuming nation.

The US Department of Energy (DoE) said on Wednesday that stockpiles jumped 3.4 million barrels in the week ending April 29, beating analyst predictions for a gain of 3.2 million barrels.

A rise is seen as an indication of softer energy demand in the world's biggest economy.

Crude futures have slumped since the start of the week as traders fret about slower growth in big oil importers and mull the impact of the death of Al-Qaeda chief Osama bin Laden on global political risk in the market.

© 2011 AFP

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