Oil prices fall further as dollar strengthens

24th November 2010, Comments 0 comments

World oil prices slid further on Wednesday as the dollar rallied on the back of renewed fears over the eurozone debt crisis and tensions on the Korean peninsula, analysts said.

Brent North Sea crude for delivery in January fell 90 cents to 83.06 dollars a barrel in London morning trade.

New York's main contract, light sweet crude for January, shed 72 cents to 81.02 dollars.

The euro sank under 1.33 dollars on Tuesday as the single currency was battered by rising Spanish borrowing costs and Ireland bailout concerns, while the safe-haven dollar was boosted by a spike in Korean tensions.

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

World financial markets have been rocked this week by eurozone debt worries and after North Korea fired dozens of artillery shells onto a South Korean island on Tuesday, killing four people and triggering an exchange of fire.

The news has lifted the US currency which is widely regarded by investors as a safe-haven in times of geopolitical uncertainty.

The oil market is normally also boosted by such tensions -- but this was overshadowed by the effect of the soaring US currency, according to PVM Oil Associates analyst Tamas Varga.

"Under less financially-stressful circumstances, increased tensions between North and South Korea could have been expected to raise oil prices.

"That was not the case (Tuesday) in the face of a strengthening dollar," Varga added.

Later on Wednesday, the oil market will digest the US government's latest snapshot of crude inventories in the key energy-consuming nation.

Analysts predict that American crude inventories tumbled by 1.9 million barrels in the week ending November 19, Dow Jones Newswires said.

Gasoline or petrol stockpiles are seen falling by 900,000 barrels, while stocks of distillates, which include heating oil and diesel, are expected to have dropped 1.5 million barrels.

© 2010 AFP

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