Oil prices slide on eurozone debt jitters

14th July 2011, Comments 0 comments

World oil prices fell on Thursday amid worries that improving energy demand could be impacted by the escalating eurozone debt crisis, analysts said.

New York's main contract, West Texas Intermediate for delivery in August, slid $1.64 to $96.41 a barrel.

Brent North Sea crude for August shed 68 cents to $118.10.

"Jitters over the eurozone's peripheral (member states') debt will continue dictating direction" of oil prices, said Andrey Kryuchenkov, an analyst at Russian financial group VTB Capital.

Prices rallied on Wednesday after news of a steeper-than-expected drop in US crude inventories indicated that demand was still strong in the world's largest oil consuming nation.

"The US oil inventories report showed a larger-than-expected stock drawdown for the sixth consecutive week," said Victor Shum, an analyst with Purvin and Gertz energy consultancy in Singapore.

This indicated that "US oil demand remains quite strong despite the high unemployment situation."

US crude inventories dropped by 3.1 million barrels last week, more than double the amount expected by analysts.

Gasoline (petrol) inventories fell by 800,000 barrels, reflecting heavy demand over the July 4 Independence Day holiday weekend, which is one of the busiest periods of the summer driving season in the United States.

The Paris-based International Energy Agency warned on Wednesday that the oil market needed more supplies for the third quarter of 2011, despite increased OPEC production and its own emergency stock release last month.

"We welcome rising OPEC volumes seen in June but the market needs still more oil," the IEA said in a monthly report, describing demand as "robust."

On June 23, the IEA authorised an emergency drawdown of its member nations' strategic oil stockpiles to replace lost output from Libya and to give the global economy relief from soaring energy prices.

Oil prices have rebounded since then and are now above the levels they were at prior to the IEA's announcement.

© 2011 AFP

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