Business News

Oil plunges $9 to near $136 a barrel



2008-07-15 10:56:13

LONDON (Reuters) –

Oil tumbled by more than $9 to near $136

a barrel in volatile trading on Tuesday on profit-taking driven

by technical factors and as fears receded that a strike by

Brazilian oil workers would hit supplies.

“This is largely profit-taking run amuck. There is no real

hard news that you can tie this to. We have seen fundamentals

weakening progressively month after month and the fall in the

stock market calls our attention to that,” said Tim Evans of

Citi Futures Perspective.

U.S. crude at one point fell by an unprecedented $9.26 a

barrel — the biggest percentage drop since December 2004 —

and by 11:50 a.m. EDT, it was $5.90 down at $139.28 a barrel.

London Brent crude fell $5.10 to $138.82.

Brazilian oil giant Petrobras said its output was back at

full capacity and would remain so until the end of the five-day

strike that started at midnight on Sunday.

“The news that Brazil’s oil production is back at capacity

despite a strike is negative for oil prices as crude earlier

rallied on prospect of lower output from there,” said Phil

Flynn, analyst at Alaron Trading.

Also weighing on prices was the cut in OPEC’s forecast for

global oil demand growth in 2008 for a fourth time this year.

The 13-member oil exporters’ group, source of two in every

five barrels of oil, said consumption would slow in 2009,

signaling a more comfortable supply and demand balance.

Oil had also eased earlier in the session as Chevron said

production had been restored at the 120,000-barrel per day

Escravos pipeline in Nigeria, resolving one of the disruptions

that have cut the African country’s supply.

Crude has risen from $20 a barrel in January 2002 to a peak

of $147.27 last week on growing demand from nations like China

and rising cash inflows into commodities from investors seeking

to hedge against inflation and the weak dollar.

The dollar fell to a record low against the euro on Tuesday

as concern about the health of the U.S. financial sector

weighing on sentiment. Investors said renewed weakness in the

U.S. currency could support oil.


Meanwhile, traders are keeping a watch on a low-pressure

weather system about 1,200 miles east of the Lesser Antilles

which may develop into a tropical depression.

Energy traders watch for storms that could enter the Gulf

of Mexico and threaten U.S. oil and gas production facilities.

The latest snapshot of supply in the United States, the

world’s top oil consumer, due for release on Wednesday, will

provide direction for prices later in the week.

A Reuters poll forecast that U.S. crude stocks fell 1.2

million barrels, gasoline inventories dropped 300,000 barrels

while distillates rose by 1.9 million barrels.

(Additional reporting by Alex Lawler and Luke Pachymuthu,

editing by Anthony Barker and James Jukwey)

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