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Oil slightly down after plunging more than $6

16 Jul 2008 09:44 GMT

Crude dips in Asia after the largest single-session drop in 17 years.



Oil prices were slightly down on Wednesday in Asia after having plummeted more than $6 per barrel yesterday, the largest drop in 17 years.

Light sweet crude oil for August delivery plunged $6.44 per barrel to $138.74 a barrel yesterday on the New York Mercantile Exchange(NYMEX) in an extremely volatile session. At one point, prices tumbled by more than $10 to $135.92 per barrel from the day's intra-day high of $146.73 per barrel.

In London August Brent Crude on the Intercontinental Exchange (ICE) fell by $5.17 to $138.75 per barrel. The contract reached an intra-day high of $145.55 per barrel and also dropped by over $10 to $134.96 per barrel before settling higher at the close of trading.

Yesterday's fall in prices, which eclipsed last Tuesday's slide of $5.33, marked the biggest single-session decline in dollar terms since the 1991 Gulf War when President George H.W. Bush released oil from the Strategic Petroleum Reserve and the price per barrel dropped 34 percent in one day. Even so, prices are no lower than a week ago.

Federal Reserve Chairman Ben Bernanke told Congress that "numerous difficulties" are racking the US economy, and warned that rising prices for energy and food are elevating the risks of inflation.

At the same time, the Labor Department reported that wholesale inflation jumped by 1.8 percent in June, a larger-than-expected gain. Over the past year, wholesale prices have risen 9.2 percent, the most since 1981.

The latest monthly market report from the Organization of Petroleum Exporting Countries(OPEC) also added to bearish market sentiment. The cartel predicted world oil demand will rise by 900,000 barrels a day in 2009, or 100,000 barrels per day less than this year. OPEC said the fall in demand growth was due to the recent economic downturn and high petrol prices in developed countries.

Meanwhile, a weak US dollar and potential supply threats continued to put a floor to prices.

The dollar fell to 104.62 yen in Asian currency trade, whilst the euro was little changed at $1.5910, just off a record high against the dollar.

In Brazil, a strike by Petrobras offshore oil workers in Brazil could be settled before its scheduled end on Friday. Presidential aide Luiz Dulci said the energy giant could reach agreement with the striking workers over the next few days. However, a union representing a second group of workers said they plan to stage a separate two-day nationwide strike starting Thursday to demand greater participation in the company's profits.

On Wednesday, NYMEX light sweet crude oil was trading at $138.21 per barrel at 09:34 GMT, down $0.53 on the previous day's settlement price. ICE Brent crude was also $0.53 lower than yesterday, trading at $138.22 per barrel.




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