OIL prices eased overnight, falling more than $US6 in a week, on worries over economic growth and slowing demand
New York’s main oil contract, light sweet crude for August delivery, slipped 41 cents to close at $US128.88 a barrel.
From Tuesday through yesterday, New York crude had plunged more than $US15.
In London, Brent North Sea oil for September delivery dropped 88 cents to settle at $US130.19.
“Market participants have become increasingly anxious about the (US) domestic economy at the same time that the conflict between the West and Iran over the latter’s nuclear program may be on the wane,” said Mike Fitzpatrick, an analyst at MF Global.
Investors abandoned oil in droves as the impact of the economic slowdown – both current and future – suddenly loomed high on traders’ radar screens.
Prices have plummeted since striking record highs above $US147 a barrel exactly a week ago.
Traders worried that the slowing US economy would translate into lower demand from the world’s biggest energy consumer.
“The recent huge pullback from new record highs above $US147 a barrel has come as the economic mess in the US continues, which has hurt current and future forecasted demand for oil,” said Sucden analyst Michael Davies.
“At the same time there are growing signs that the fallout in the US is impacting the rest of the world, with economic data in Europe, the UK, and Japan worrying and there are even signs of slower growth in India and China, the key demand growth drivers.”
MF Global’s Fitzpatrick predicted no rebound any time soon.
“The rout should continue into next week, unless some unusually optimistic economic statistic or corporate report appears,” he said.
Oil traders were focused on Geneva, where the European Union’s foreign policy chief, Javier Solana, was to hold talks tomorrow with Iran’s nuclear negotiator, Saeed Jalili, on Iran’s contested nuclear program.
The United States and other major powers have been locked in a long-running standoff with Iran over its nuclear drive, which they suspect is aimed at making weapons.
Iran has repeatedly rejected demands to suspend uranium enrichment, insisting that its activities are exclusively aimed at energy production.
The Islamic republic is the world’s fourth biggest producer of crude oil, and tensions over its nuclear effort have helped push prices to record highs recently.
Washington’s decision this week to send Under Secretary of State William Burns to the talks marked a major policy shift by Washington, which has not had diplomatic relations with Iran since 1980.
Iran had said that the talks are aimed at finding “a framework” for future talks by the negotiating parties.
”(Market) participants will be closely watching news releases over the weekend to see what colour smoke comes from the meetings in Geneva. While a major breakthrough is not expected, we re-emphasise that direct US participation alone is,” Mr Fitzpatrick said.