petroleumworld

Oil prices tumbled Tuesday as sentiment was dampened by deteriorating consumer confidence in the United States, a key energy consuming nation.

New York's main contract, light sweet crude for delivery in September, slipped 1.48 dollars to 77.50 dollars.

London's Brent North Sea crude for September lost 1.37 dollars to 76.13 dollars.

Prices plunged after a closely-watched survey showed Tuesday that US consumer confidence plunged to its worst level in five months on concerns over unemployment amid an uncertain economic outlook.

The Conference Board, a business research firm, said its consumer confidence index, which had declined sharply in June, retreated further this month.

The index fell to 50.4 points from 54.3 last month, based on a survey of 5,000 US households, the firm said in a statement. It is now at its lowest level since February.

Most economists had expected the index to fall to 51.0 points in July.

"Consumer confidence is a good indicator of future demand," said Adam Sieminski, energy economist at Deutsche Bank. "It impacts the sentiment about where demand will be in the next six months."

High unemployment, only modest wage growth and a credit crunch has put household finances under pressure as US economic growth slows.

The economy emerged in the middle of last year from a brutal recession that struck in December 2007, but growth has eased with some analysts worrying about a "double-dip" recession.

Investors will keep a close eye on US inventory levels, the latest data of which will be released Wednesday, to gauge demand prospects.

Most analysts expect crude oil inventories to have fallen by 1.4 million barrels last week, but that gasoline stockpiles were up 600,000 barrels and that distillates in storage were up by 1.9 million barrels, according to a survey by Dow Jones Newswires.

"In fact, crude oil inventories probably fell to a four-month low last week as imports declined and Tropical Storm Bonnie disrupted production," said MF Global energy analyst Mike Fitzpatrick.

He said "one well-known" investment house thought oil futures prices were "significantly" below the level warranted by "fundamentals" and that they offered buying opportunities for this year and next.

"While this may prove very prescient, it is hard to climb on board this particular band wagon with millions still unemployed, industrial production stagnant and a declining (consumer inflation)," Fitzpatrick said.

Story from AFP
AFP 07/27/2010 21:23

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