World oil prices drift lower

30th August 2011, Comments 0 comments

Oil prices aimed lower on Tuesday, as equities and the euro ran out of steam following news of tumbling eurozone economic confidence that sparked fresh fears of a downturn.

Many traders also took profits from recent gains that were won on the back of upbeat US data, and after Hurricane Irene caused no major damage to the nation's petroleum industry.

Brent North Sea crude for delivery in October dropped 30 cents to $111.58 in early afternoon deals, as London traders returned after a bank holiday on Monday.

New York's main contract, West Texas Intermediate (WTI) for October shed 52 cents to $86.74 a barrel.

"We are retreating with a small pullback in equities, also with a dollar rebound weighing on prices," VTB Capital analyst Andrey Kryuchenkov told AFP.

Frankfurt and Paris stocks sank on Tuesday, as investors digested news of slumping eurozone economic confidence, but London rose as investors played catch-up after a three-day weekend.

Consumer and business confidence in the eurozone economy slumped in August, falling for the sixth consecutive month, an EU survey showed amid rising fears of an economic slowdown.

The Economic Sentiment Indicator (ESI) fell by 4.7 points to 98.3 in the 17-nation eurozone compared to 103 points in July. In the wider 27-nation EU, the ESI fell by 5.0 points to 97.3.

In reaction, the European single currency slid as low as $1.4385. A stronger greenback weighs on dollar-priced oil because it becomes more expensive for buyers using weaker currencies.

"Oil in both New York and London fell ... in light overnight volume as the dollar gained strength against riskier currencies," added analyst Addison Armstrong at US-based Tradition Energy.

Crude oil prices had risen in earlier Asian trade on the back of hopes that the US economy will be able to find a way out of its slump without more monetary stimulus, analysts said.

Last week, US Federal Reserve chief Ben Bernanke voiced expectations the economy would grow in the second half of the year after near-stagnant growth in the first six months.

Bernanke's speech in Jackson Hole, Wyoming, in which he also made no new announcement of monetary stimulus, was interpreted as a sign of confidence in the world's largest economy, which is also the biggest oil consumer.

"Nothing new was said by Bernanke so sentiment on the broader market (is) still shaky," added Kryuchenkov on Tuesday.

"Otherwise, little (has) changed in fairly dull trading, with no fundamental news, while the market watches developments in Libya."

The oil market had risen on Monday as investors reacted to news of a rebound in consumer spending in the United States, which is the world's leading oil-consuming nation.

Further ahead, traders will focus on Friday's non-farm payroll report -- which is the most closely watched barometer on employment levels in the world's largest economy.


© 2011 AFP

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