Oil prices slide by more than a dollar

20th May 2010, Comments 0 comments

World oil prices shed more than a dollar on Thursday, with sentiment rattled by investor concerns about the eurozone debt and deficit crisis, and a strong US currency, analysts said.

New York's main contract, light sweet crude for delivery in June, plunged 1.01 dollars to 68.86 dollars a barrel in midday trading.

The June contract, which expires at the close, had struck its lowest level for more than seven months on Wednesday -- at 67.90 dollars -- on fears about the impact of the eurozone crisis on energy demand.

However they recovered late in the day on positive US economic data.

Elsewhere on Thursday, London's Brent North Sea crude for July sank 1.24 dollars to 72.45 dollars a barrel.

World financial markets were slammed on Wednesday after Germany introduced a ban on so-called naked short-selling in eurozone government bonds, associated insurance derivatives and 10 major financial stocks.

"Crude was still lower as risk aversion continues to grip the broader market and after global equities lost more ground following Germany's sudden move to ban naked short selling of certain stocks, credit default swaps and sovereign bonds," said VTB Capital analyst Andrey Kryuchenkov.

"Global markets reacted negatively to a real threat of tougher financial regulations with the approaching G20 summit in June."

In a naked short, a trader sells a stock that he does not yet own, hoping to be able to borrow or buy it more cheaply before he has to part with it, and thus being able to pocket the difference.

Oil also fell on Thursday as the European single currency dipped against the dollar, but held above the four-year low that was struck on Wednesday.

The euro traded at 1.2335 dollars in late morning deals here, one day after striking 1.2144 dollars -- the lowest level since mid-April 2006.

The stronger greenback makes dollar-priced crude more expensive for buyers using weaker currencies, and this tends to dampen demand and prices.

Commerzbank analyst Carsten Fritsch argued that oil under 70 dollars a barrel would probably tempt more traders to part with their cash.

"Several market players are likely to see a price below 70 dollars as a buying opportunity," said Fritsch.

Late on Wednesday, the oil market recovered amid hopes of a stronger recovery of the battered United States economy.

The US Federal Reserve predicted that the American economy would grow by between 3.2-3.7 percent this year. That was stronger than the previous estimate of 2.8-3.5 percent expansion that was given in January.

Latest official data also revealed falls in US energy stockpiles, signalling greater demand in the largest energy consuming nation and lending some support to the market.

© 2010 AFP

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