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TodayOnline.com: Crude oil prices slump under 59 dollars per barrel

Wednesday • October 4, 2006

World oil prices have sunk under 59 dollars, hitting the lowest points for seven and a half months as traders focused on healthy US stocks and a potential end to the Iranian nuclear crisis.

Crude futures, which lost about two dollars on Monday, shed 3.0 percent in value on Tuesday to strike their lowest levels since February 16.

New York’s main contract, light sweet crude for delivery in November, tumbled 2.19 dollars to 58.84 dollars per barrel in pit trading.

That was 25 percent lower than an all-time peak of 78.40 dollars in July. The contract later pushed back up to 59.25 dollars.

Brent North Sea crude for November delivery plunged 2.08 dollars to 58.37 dollars per barrel in electronic deals on Tuesday. The contract later traded at 58.80 dollars.

Brent crude has now fallen by almost 26 percent since its record high of 78.64 dollars reached in August.

“The market is in a negative mood at the moment,” said Investec analyst Bruce Evers.

“Geopolitics are calmer (in the Middle East), inventories and certainly distillate stocks in the US seem to be ample, and the hurricane season has been very calm.”

Prices were weighed down by a plan aimed at breaking the deadlock over the nuclear energy crisis in Iran — which is the world’s fourth biggest crude producer.

Iran on Tuesday suggested that France should lead a consortium to produce enriched uranium on Iranian soil, as a way out of the impasse with the West over its contested nuclear programme.

The offer from the deputy head of Iran’s atomic energy agency came amid warnings that time was running out for Tehran to broker a deal with the European Union and escape possible UN sanctions.

“The Iranian situation seems to have got a lot calmer,” Evers added.

Iran has so far refused to comply with Western demands that it suspend uranium enrichment as proof it is not seeking nuclear weapons.

Tehran insists that its nuclear programme is solely for peaceful energy needs and rejects US allegations that Tehran wants to produce nuclear weapons.

Analysts argue that if Iran faced economic sanctions, the Islamic republican might retaliate by disrupting its oil exports, thus sparking a further possible surge in crude prices.

World oil markets were also absorbing news from Royal Dutch Shell that nine of the 25 oil contractors who went missing in Nigeria, following an attack by heavily-armed assailants, have been freed.

Twenty-five people working as contractors for Shell went missing following the attack in which 14 Nigerian soldiers were killed, local newspapers reported Tuesday.

Nigeria is the world’s sixth biggest crude exporter with a normal daily output of 2.6 million barrels — but attacks on installations there have cut oil output by about a quarter since the start of the year.

Traders are now looking ahead to Wednesday’s weekly snapshot of US energy stockpiles from the Department of Energy.

Analysts expect that distillates, which include heating oil, rose by another 1.3 million barrels last week. Demand for heating fuel normally hits a peak during the northern hemisphere winter.

Looking ahead, Evers said that price downside would be limited by the potential slashing of output by the Organization of the Petroleum Exporting Countries.

“People are starting to talk about 50 dollars… but if prices continue to fall too much, OPEC is going to intervene before its December meeting,” he said. — AFP 

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