LONDON (AFP) - Oil prices fell slightly on Wednesday after a brief rally to stand below 122 US dollars a barrel as the market awaited weekly data on the health of energy inventories in the United States.
Ahead of the data, traders digested news that Libya had resumed deliveries of oil to Switzerland that had been cut off last Thursday over a diplomatic row between the two countries.
New York's main contract, light sweet crude for September delivery, shed 54 cents to 121.65 dollars a barrel in electronic deals.
Brent North Sea crude for September dropped 45 cents to 122.26 dollars a barrel.
"Oil futures were a little lower, consolidating after losses yesterday (Tuesday) and ahead of the weekly US fuel inventories report," said Sucden analyst Andrey Kryuchenkov.
Oil prices had tumbled last Tuesday, partly owing to market concerns about weakening demand in the United States, the world's largest consumer of energy, traders said.
Brent crude closed down more than three dollars, leaving it about 25 dollars below its record high of 147.50 dollars reached on July 11.
The fall is "gigantic in dollar terms," Victor Shum of Purvin and Gertz international energy consultancy said on Wednesday.
He added that a stronger dollar and worries about slackening oil demand in the United States were behind the sharp decline in prices.
A stronger US unit makes dollar-priced crude oil more expensive for buyers holding weaker currencies.
An internet report adds: Oil has fallen more than $23 a barrel, or 16 per cent, since peaking on July 3. Gasoline has slipped below $4.0 a gallon and is dropping fast as Americans drive less. Natural gas prices, which had risen the fastest this year as traders anticipated a hot summer, have fallen 33 per cent since the beginning of the month.
The declines in energy costs come after an equally sharp correction in the prices of many agricultural commodities like corn, wheat and rice, which took place a few weeks ago. These moves suggest to economists that global markets, in a near-panic early this year to find prices high enough to allocate scarce supplies, overshot the mark and bid prices too high.
The sharp drop in energy prices since the beginning of the month is turning into a rare bright spot in a bleak economic landscape.
For the moment, at least, fears of a prolonged energy shock seem to have subsided a bit.
As a result of looser market fundamentals, many analysts believe energy prices could keep falling through the end of the year. The president of the OPEC oil cartel, Chakib Khelil, said Tuesday that oil might drop as low as $70 a barrel.
Whether that actually happens will depend on the course of the American economy and its impact on the rest of the world. How long will the American slowdown last and what effect will it have on emerging markets like China, which have accounted for the bulk of the growth in oil demand?
Many experts warn that a hurricane hitting the oil-producing region of the Gulf Coast or renewed tensions in the Gulf could easily push prices back up again, quickly.
