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Oil prices slump as central bank action loses luster
NEW YORK
Petroleumworld.com 14 12 07Oil prices tumbled on Thursday as traders turned skeptical about the success of a coordinated central bank action this week aimed at easing tight credit to avert a sharp economic slowdown.
New York's main contract, light sweet crude for January delivery, slumped 2.14 dollars to close at 92.25 dollars per barrel.
In London, Brent North Sea crude for January dropped 1.90 dollars to 92.12 dollars per barrel.
"Prices lost a lot of what they gained yesterday and I think we are going to give back all of it tomorrow," said James Ritterbusch, an analyst at Ritterbusch and Associates.
"The market is skeptical that the Fed's decision isn't enough to prevent an economy slowdown," he said.
Prices had jumped more than four dollars Wednesday on the view that a coordinated plan by five major central banks to ease a global credit squeeze related to a US housing crisis would support the world economy, and as a result, the demand for oil.
The initiative, led by the US Federal Reserve, included the central banks of the eurozone, Britain, Switzerland and Canada.
However, oil prices sank in volatile trade as traders feared the plan would not work.
"The Fed is freaked out, the floor traders are not happy, and the energy markets keep roiling along," said Alaron Trading's Phil Flynn.
"Welcome to a new world of oil price volatility with moves that used to take weeks taking hours," he said. "Obviously the volatility is incredible."
Steve Rowles, an analyst with CFC Seymour, added that the the market was "somewhat overbought" and fell back on Thursday.
Rowles discounted the impact of a weekly US government report on energy stockpiles.
Government data published Wednesday revealed that US crude inventories had last week fallen by 700,000 barrels, roughly in line with consensus forecasts for a drop of 750,000 barrels.
The Department of Energy said that US stocks of distillates, which include heating fuel and gasoline, dropped by 800,000 barrels in the week ended December 7. The market had expected a gain of 500,000 barrels.
Distillates are being closely watched amid the northern hemisphere winter when demand for heating fuel peaks.
Story from AFP 13 2050 GMT 12 07
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