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Oil prices drop on lower global demand forecast
AFP
NEW YORK
Petroleumworld.com 05 13 06
World oil prices fell Friday after the International Energy Agency lowered its forecast for global oil demand this year and foreign hostages were freed in major crude producer Nigeria.
New York's main contract, light sweet crude for delivery in June, dropped 1.42 dollars to 72.04 dollars per barrel in closing deals.
In London, Brent North Sea crude for June delivery lost 1.11 dollars to close at 72.32 dollars.
Prior to the falls, prices had risen by about two dollars since Wednesday due to the abduction of three foreign workers in the Nigerian oil city of Port Harcourt, Iran's nuclear crisis and tight gasoline stocks in the United States.
Crude futures were lower Friday "as a report from the IEA cut its 2006 forecast for demand growth by 200,000 barrels per day to 1.25 million bpd as high prices have slowed consumption," Sucden analysts said in London.
The report was "clearly bearish," said James Williams, analyst at WTRG Economics.
John Kilduff at Fimat USA said that slowing global economic activity may reduce demand, but that he does not expect much relief from high prices.
"The bottom line continues to be that while some economic damage is being wreaked by high prices, it is not enough, for now, to overwhelm the seeming surfeit of geopolitical troubles in oil producing countries around the world," he said.
Regarding Nigeria, police confirmed Friday that three foreign oil workers seized Thursday in the Niger Delta had been freed.
The three men worked for Saipem, a subsidiary of the Italian ENI oil group, and were kidnapped at Buguma about 30 kilometers (19 miles) southwest of Port Harcourt, capital of the oil-rich Rivers region.
Attacks since January by a group known as the Movement for the Emancipation of the Niger Delta (MEND) have left at least 24 members of the security forces dead.
The attacks have also cut Nigeria's exports of 2.6 million barrels per day by around a quarter, helping to force up world prices.
Despite Friday's drop in prices, "the market is not expected to fall too far as tensions in the Middle East remain," Sucden analysts added.
Recent high oil prices have been caused largely by global supply concerns linked to Iran, the world's fourth biggest producer of crude, whose nuclear ambitions have triggered a diplomatic crisis.
Traders fear that the Islamic republic may slash exports and send oil prices rocketing should action be taken against its disputed nuclear energy program.
Another factor supporting prices is a US government requirement this year for refineries to replace the additive MTBE, which is a recognized health risk, with ethanol in fuel.
Analysts believe the initiative, which refineries are trying to meet ahead of the northern hemisphere summer, may slow production this year.
AFP 12 2002 GMT 05 06
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