World oil prices fall sharply; New York drops under $93

23rd June 2011, Comments 0 comments

World oil prices slumped dramatically on Thursday as a stronger dollar and growing gloom over the global economic outlook caused sizeable profit-taking, traders said.

New York's main contract, West Texas Intermediate (WTI) for delivery in August, tumbled as low as $92.67 a barrel. It later stood at $93.09, down a hefty $2.32 from Wednesday's closing level.

Brent North Sea crude for August meanwhile dived $3.09 to $111.12 a barrel in midday deals.

Prices had rallied sharply on Wednesday, as news of tumbling US crude and gasoline reserves sparked hopes of resurgent demand in the United States, which is the world's biggest oil consuming nation.

However, the market hit reverse gear on Thursday as the Federal Reserve downgraded its US economic growth forecast, while downbeat Chinese manufacturing data sparked concern demand from the Asian powerhouse economy.

Fed Chairman Ben Bernanke also warned of stubborn economic headwinds that could persist for longer than expected.

The dollar won support after the Fed confirmed that its second round of bond-buying will end later this month -- signalling that there would be no further stimulus measures.

The euro also remains dogged by worries about spreading contagion from the Greek-eurozone debt crisis.

"Following Bernanke's comments, a weaker outlook for the US economy and a stronger US dollar, crude oil prices are under pressure today, on a downside momentum," said analyst Myrto Sokou at the Sucden Financial Research brokerage.

"The market sentiment has been hurt as the US dollar rallied with Brent retreating more than three percent and WTI crude more than two percent lower, amid (the) weaker US oil demand outlook."

A stronger greenback makes dollar-prices commodities more expensive for buyers using weaker currencies. This tends to dent demand and weigh on prices.

Traders also took their cue from disappointing news from China, which is the world's leading consumer of energy.

Growth in China's manufacturing activity fell to an 11-month low in June, preliminary HSBC data released on Thursday showed, as Beijing's efforts to cool the red-hot economy continued to bite.

HSBC's preliminary purchasing managers index fell to 50.1 in June from a final reading of 51.6 in May, the British banking giant said, showing the sector barely grew as authorities tightened restrictions on bank lending.

A reading above 50 indicates the sector is expanding while a reading below 50 indicates contraction.

The US Department of Energy (DoE) had revealed on Wednesday that American crude reserves sank 1.7 million barrels in the week ending June 17, much more than forecasts for a drop of 800,000 barrels.

And gasoline or petrol stockpiles fell 500,000 barrels, confounding analysts' forecast for a gain of 800,000 barrels.

Gasoline figures are closely watched amid the peak-demand driving season in the United States, with many Americans hitting the road for their summer holidays.


© 2011 AFP

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