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Oil prices slide on poor US growth
AFP
NEW YORK
Petroleumworld.com 07 29 06
Oil prices slumped Friday following news of slower economic growth in the United States, which prompted fears for demand in the world's biggest consumer of energy, traders said.
New York's main contract, light sweet crude for delivery in September, plunged 1.30 dollars to close at 73.24 dollars a barrel.
In London, Brent North Sea crude for September delivery sank to 73.39 dollars a barrel, down 1.62 dollars from Thursday's settlement.
US economic growth slowed to just 2.5 percent in the three months to June, government data showed Friday, as consumers turned nervous in the face of sky-high fuel prices and a cooling property market.
The weak data "reflects a depressed consumption, which is usually contributing to lower prices because it could lead to a fall in the US demand for gas (gasoline)", said AG Edwards analyst Bill O'Grady.
The Commerce Department said that gross domestic product (GDP) growth in the second quarter decelerated sharply from the blistering pace of 5.6 percent recorded over January-March.
The figure was also much worse than Wall Street's second-quarter forecast of 3.0 percent.
"I think the GDP data contributed to the (oil price) falls," said Man Financial analyst Andy Lebow. "The market was soft before that but the GDP data accelerated the sell-off."
However, losses were limited by supply concerns in Nigeria as well as tensions in the Middle East.
Prices are winning some support from "a combination of Nigeria's disruptions and the latest US inventory report which had quite a large drop in gasoline stocks and not much movement on the crude front", Global Insight analyst Simon Wardell said.
"And the market is reacting to the situation in the Middle East."
The market was still feeling the ramifications after Royal Dutch Shell declared "force majeure" on crude deliveries from Nigeria's Bonny oilfield for July and August. The move means contracts might not be honoured during those two months.
The Anglo-Dutch giant declared force majeure after a leak in an oil pipeline in southern Nigeria cut output by 180,000 barrels per day.
Disruptions blamed on unrest in the Niger Delta have brought Nigeria's total production loss to 675,000 barrels per day, or 26 percent of the country's normal daily output.
Tobin Gorey, commodities strategist at the Commonwealth Bank of Australia in Sydney, added that tensions over Iran were also "a big part" of why oil prices have remained above 70 dollars.
Six major powers held a meeting on Iran's nuclear programme on Thursday and came closer to agreeing on a resolution to put to the United Nations Security Council, diplomats said.
The council's permanent members -- Britain, China, France, Russia and United States -- plus Germany agreed to send the latest draft resolutions back to their governments.
The draft aims to force Iran to cease uranium enrichment, which can be used to make nuclear weapons. Iran says its atomic programme is for peaceful energy purposes.
Iran is also a strong backer of the militant Islamic group Hezbollah which is fighting Israel troops in Lebanon.
Concerns that the violence could spread to Iran and other major crude-producing nations in the Middle East saw oil prices soar to all-time highs above 78 dollars earlier this month.
AFP 28 1944 GMT 07 06
Copyright ©2006 AFP. All Rights Reserved.
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