Oil prices extend losses as dollar rises sharply

5th January 2011, Comments 0 comments

World oil prices fell further on Wednesday as the dollar strengthened on strong US jobs data, offsetting news of another big drop in US crude inventories which would normally be supportive.

Brent North Sea crude for delivery in February dropped 40 cents to 93.13 dollars a barrel in late London trade.

New York's main contract, light sweet crude for February sank 95 cents to 88.43 dollars.

The dollar rose strongly against the euro on Wednesday as data showed a surge of new jobs in the US private sector during December.

A stronger US unit makes dollar-priced crude more expensive for buyers using weaker currencies. That in turn tends to dent demand and prices.

The US private sector added a seasonally adjusted 297,000 jobs in December, more than triple the number created in November, private payrolls firm ADP said on Wednesday.

December's increase was way above the consensus forecast of 100,000 jobs and marked the fourth straight month of overall gains.

Elsewhere, the US Department of Energy reported that stockpiles of crude oil slumped by 4.2 million barrels during the final week of 2010. Analysts had forecast a drop of 2.2 million barrels, according to Dow Jones Newswires.

Crude inventories slumped by more than 15 million barrels in the United States -- the world's biggest oil consumer -- during the first three weeks of December due to strong demand.

Despite oil prices falling for a second day running they remained close to two-year highs and the International Energy Agency warned they were in danger of threatening a fragile economic recovery in developed nations during 2011.

"Oil prices are entering a dangerous zone for the global economy," IEA chief economist Fatih Birol was cited as saying in the Financial Times newspaper on Wednesday.

"The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers."

Should prices again head towards 100 dollars, Birol's comments are likely to add pressure on oil cartel OPEC, which last month decided to leave production quotas unchanged despite the rising prices.

Oil hit two-year highs on Monday due to confidence in increased global energy demand after the US economy showed more signs of recovery.

© 2011 AFP

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