The price of oil nosedived this week on concerns that energy demand was shrinking because of a US-led global economic slowdown, traders said.
Prices slipped in volatile trading on Friday after the US Congress approved a historic US$700 billion bailout of the country’s teetering financial industry as the longterm health of the global economy remained questionable.
Oil “prices fell sharply ... as fears over the macroeconomic impact from the ongoing financial turmoil continue to dominate market sentiment,” Barclays Capital analyst Kevin Norrish said.
The market was also dragged down on Wednesday by a surprise jump in crude inventories in the US, which pointed towards weakening demand, traders said.
The US Department of Energy said crude stockpiles rose 4.3 million barrels in the week ending last Friday, surprising traders who had expected a fall of around 1.7 million barrels.
US oil demand sank 7.1 percent over the past four weeks compared with the same period a year ago, the Department of Energy said.
Oil also slumped by more than US$4.50 on Thursday despite the US Senate’s approval of the plan to buy up tainted mortgage-related assets.
“Growth fears are likely to cap gains in oil prices ... until we start seeing a pick up in winter demand with some improving economic data from the developed world and concerns over the credit market recede,” Sucden analyst Andrey Kryuchenkov said.
The market, hit by weakening global demand, has dropped sharply from record highs above US$147 in July. By Friday, New York’s main oil futures contract, light sweet crude for delivery in November, had tumbled to US$94.33 per barrel from US$105.61 a week earlier. Brent North Sea crude for November slumped to US$90.93 from US$102.60.
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