Oil prices extend falls on demand concerns, dollar rebound
Wednesday, 26 March 2008
SINGAPORE, March 25 (AFP): World oil prices continued to ease in Asian trade today on concerns over weaker US energy demand and the dollar's rebound from recent sharp declines, dealers said.
In afternoon trade, New York's main contract, light sweet crude for May delivery, dropped 51 cents to 100.35 dollars per barrel.
The contract closed at 100.86 on Monday during floor trading at the New York Mercantile Exchange.
London's Brent North Sea crude for May delivery fell 48 cents to 99.38, after settling at 99.86 on Monday.
"The recovery in the US dollar has simply put downward pressure on oil prices," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.
"Pricing could continue to pull back if we see further recline in the US dollar," he said.
The US currency has recovered significantly after falling to a lifetime low of 1.5905 to the euro more than a week ago. Surprising US home sales data also provided a boost.
The euro was trading at 1.5432 dollars in morning Asian trade.
A weaker US currency encourages demand for dollar-priced oil because it becomes cheaper for buyers using stronger currencies, while investors also seek to guard against risks to inflation.
Investors are also extremely cautious in their outlook for the US economy, which has been roiled by the subprime mortgage sector's meltdown. Some analysts believe the world's biggest economy is already in a recession.
US energy demand is likely to slow if economic growth weakens.
The unexpected fall of investment bank Bear Stearns, formerly among the giants of Wall Street, was also a reminder to investors on the fragility of the US economy, dealers said.
"The Bear Stearns collapse provided the trigger for investors to focus on the economic outlook in the US," as well as oil market fundamentals, said Shum.
In afternoon trade, New York's main contract, light sweet crude for May delivery, dropped 51 cents to 100.35 dollars per barrel.
The contract closed at 100.86 on Monday during floor trading at the New York Mercantile Exchange.
London's Brent North Sea crude for May delivery fell 48 cents to 99.38, after settling at 99.86 on Monday.
"The recovery in the US dollar has simply put downward pressure on oil prices," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.
"Pricing could continue to pull back if we see further recline in the US dollar," he said.
The US currency has recovered significantly after falling to a lifetime low of 1.5905 to the euro more than a week ago. Surprising US home sales data also provided a boost.
The euro was trading at 1.5432 dollars in morning Asian trade.
A weaker US currency encourages demand for dollar-priced oil because it becomes cheaper for buyers using stronger currencies, while investors also seek to guard against risks to inflation.
Investors are also extremely cautious in their outlook for the US economy, which has been roiled by the subprime mortgage sector's meltdown. Some analysts believe the world's biggest economy is already in a recession.
US energy demand is likely to slow if economic growth weakens.
The unexpected fall of investment bank Bear Stearns, formerly among the giants of Wall Street, was also a reminder to investors on the fragility of the US economy, dealers said.
"The Bear Stearns collapse provided the trigger for investors to focus on the economic outlook in the US," as well as oil market fundamentals, said Shum.