Oil slides on economic woes; traders eye Saudi 'protests'

10th March 2011, Comments 0 comments

World oil prices dived Thursday as traders fretted over downbeat economic news, despite jitters over Libyan unrest on the eve of planned protests in OPEC kingpin Saudi Arabia.

New York's main contract, light sweet crude for delivery in April, tumbled $2.94 to $101.44 a barrel. Brent North Sea crude for April slid $1.80 to $114.14 per barrel.

VTB Capital oil analyst Andrey Kryuchenkov said that market sentiment was hit by concern over the global economic outlook.

Kryuchenkov told AFP that oil prices fell on "growth concerns ... on the back of China's trade deficit and Moody's downgrade on Spain earlier today".

"A stronger dollar weighed on oil prices with crude suffering from a broader market sell off despite intensifying fighting in Libya, as output from the North African producer is largely priced in by now," he added.

Key oil consumer China said Thursday it had returned to a trade deficit in February for the first time in nearly a year.

The trade deficit of $7.3 billion -- the country's first since March 2010 and only the second in nearly seven years -- compared with a surplus of $6.45 billion in January, customs authorities said in a statement.

Global financial markets were also rocked on Thursday after Moody's rating agency cut Spain's credit rating and warned it may do so again, re-igniting fears over the eurozone debt crisis.

In a further blow, official data showed Thursday that new claims for US unemployment benefits rose more than expected last week.

However, the oil market was underpinned by ongoing violence in Libya between Moamer Kadhafi's forces and rebels -- which had sent prices surging on Wednesday.

Libya's crude oil exports have slowed sharply in the past week and are now significantly below 500,000 barrels per day it reported last week, the Paris-based International Energy Agency reported on Thursday.

Libyan oil output is down by more than two-thirds from 1.6 million barrels per day to just 500,000 due to the violent uprising against Moamer Kadhafi's regime, National Oil Corporation boss Shukri Ghanem said Wednesday.

Traders are now looking ahead to possible protests in Saudi Arabia. US experts have said that the world's biggest oil exporter seems unlikely to catch the contagion of Arab revolutions -- but nerves are on edge.

"The main focus remains on the Middle East crisis, as any potential protests for Friday's 'Day of Rage' in Saudi Arabia could make crude oil prices to surge higher, with Brent possibly retesting the $120 per barrel area," Sucden analyst Myrto Sokou told AFP.

She added: "There are large worries in the market ... as Saudi Arabia is considered to be one of the biggest oil suppliers globally (and) exports approximately 8.9 million barrels per day.

"If the political turmoil worsens across the Middle East and protests move over to Saudi Arabia, then the situation is getting rather serious."

Cyber activists have called for a "Day of Rage" after prayers this Friday, on a Facebook page. Another page calls for a "Saudi revolution" to begin on March 20. On both pages, activists are calling for political and economic reforms, jobs, freedom and women's rights.

Security has been beefed up in the capital Riyadh, with extra police deployed on main streets and to sensitive areas, witnesses said.

Westhouse Securities analyst David Hart played down market fears over the Saudi protests.

"The market does not see that as something significant enough to worry about. That's probably why they're shrugging it off, because the view is that it's most likely to remain very small," he told AFP.

"If the market was really genuinely concerned about Saudi Arabia, the prices would be significantly higher than it is now."

Oil prices spiked to 2.5-year highs in recent days amid escalating violence and supply shortfalls in Libya, a major producer and exporter of crude.

© 2011 AFP

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