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Oil prices fall below 90 dollars in Asian
Thursday, January 17, 2008
SINGAPORE (Thomson Financial) - World oil prices fell below 90 dollars in Asian trading on Friday amid deepening concerns that weakness in the US economy -- the world's biggest energy consumer -- could sharply dent demand.
In morning trade, New York's main contract, light sweet crude for delivery in February, slid 51 cents to 89.62 dollars a barrel.
The contract closed 71 cents lower at 90.13 dollars a barrel in trading on the New York Mercantile Exchange Thursday.
Brent North Sea crude for March delivery fell 20 cents to 88.55 dollars per barrel, after settling 75 cents lower at 88.75 dollars per barrel on Thursday in London.
"The drop in demand is certain in the short term with the economic slowdown in the United States affecting sentiment worldwide. Everyone stops spending, and that will drive prices further down," said Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo.
trading is volatile and in a "worst-case scenario," prices could fall to as low as 69 dollars a barrel, he said.
"I can see prices dropping to the lower 80s or even the higher 70s as we move towards the end of the first quarter," he said.
Oil prices retreated as US stocks fell sharply Thursday, with investors reeling from further dismal housing data and news of a record loss at Wall Street investment and brokerage firm Merrill Lynch.
Some analysts are predicting a prolonged real-estate slump and credit crisis could push the world's largest economy into recession.
On Friday US President George W Bush was to propose a series of "short-term, temporary measures" to stimulate the US economy and see it past current troubles, the White House said.
"If the US falls into recession and China slows down we could be headed for one of the most significant corrections of this decade in oil," said Phil Flynn, an analyst at Alaron Trading.
Prices remain at high levels but have shed more than 10 dollars since striking a record in New York of 100.09 dollars per barrel in early January.
"At the moment it seems that economic concerns continue to outweigh all these factors that drove crude prices to just above 100 dollars," Sucden analyst Andrey Kryuchenkov said in London.
"All the aspects that underpinned crude prices in 2007 and at the start of this year are still here, with tight supplies, geopolitical fears on the supply side and the broad weakness in the greenback."
But until global economic jitters ease, there is likely to be less emphasis on supply fundamentals, he said.
Mitsubishi Corp's Nunan said oil prices will only start to bounce back from first-quarter lows during the US summer holiday driving season when demand for gasoline peaks.
