25/09/2009 - 06:17

Oil prices dive under $66

25/09/2009 - 06:17

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World oil prices tumbled Thursday as weak US economic data and signs of sluggish energy demand in the United States highlighted fears about a tepid recovery from the global recession.

Oil prices dive under $66

World oil prices tumbled Thursday as weak US economic data and signs of sluggish energy demand in the United States highlighted fears about a tepid recovery from the global recession.

New York's main contract, light sweet crude for November delivery, dropped $3.08 to close at $65.89 a barrel.

Brent North Sea crude for November delivery slid $3.17 to settle at $64.82 per barrel.

Prices had already wiped out almost three dollars on Wednesday in reaction to a large jump in US crude oil inventories -- a sign that energy demand remains weak despite a fragile economic rebound.

"It looks like there is a flood of money out of commodities," said Ellis Eckland, an independent oil trader.

"Investors want to get to get to the exit as soon as possible; they feel that the real economy is weak."

The economic jitters intensified after an industry survey showed US existing home sales fell 2.7 per cent in August as buying fever eased after four consecutive monthly increases.

The report from the National Association of Realtors sent investors looking for the safety of the dollar, and hit stocks and oil -- which because it is priced in dollars suffered a further hit.

Celia Chen at Moody's Economy.com said a housing market rebound remains critical to a US economic recovery and that may be imperilled by a high level of foreclosures.

"The potential that the coming onslaught of foreclosures will send the housing market back down into a tailspin is thus also a downside risk for the broader economy's emerging recovery," she said.

Mike Fitzpatrick at MF Global said the market failed to be comforted by Wednesday's comment from the Federal Reserve that economic activity is "picking up", and focused on the central bank's other comments suggesting a weak recovery.

"Sentiment looks to have shifted, as scepticism about the strength of the recovery has risen," he said.

The US government's Department of Energy (DoE) revealed on Wednesday that crude reserves rallied 2.8 million barrels in the week to September 18, confounding analysts' expectations for a decline.

The DoE said US stocks of distillates, which include heating fuel, rose by three million barrels last week.

Distillates are being closely monitored ahead of the northern hemisphere winter when demand for heating fuel peaks.

Energy demand plunged after the global economy slipped late last year into its worst recession since the 1930s.

This sent oil prices tumbling from historic highs of more than $147 in July 2008 to around $32 in December of that year.

Prices have since recovered somewhat but investors remain concerned over the pace of the upturn.

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