Oil steady at mid-$71 a barrel after moderate fall overnight

Oil steady at mid-$71 a barrel after moderate fall overnight
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First Published: Fri, Aug 10 2007. 07 42 PM IST
Updated: Fri, Aug 10 2007. 07 42 PM IST
Gillian Wong / AP
Singapore: Oil prices were nearly flat Friday, 10 August, after falling in the previous session on concerns over the US economy.
Light, sweet crude for September delivery lost 12 cents to $71.47 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-afternoon in Singapore. The contract fell 56 cents to settle at $71.59 a barrel Thursday.
Reports on Thursday suggesting a sluggish economy and news of spreading problems in the US subprime mortgage sector contributed to the decline. The US Labor Department reported the number of people signing up for jobless benefits grew last week, while many retailers reported disappointing July sales.
Also, French bank BNP Paribas froze three securities funds, saying they no longer know what they are worth because of problems in the US subprime market. Moves by the European Central Bank and Federal Reserve to provide more cash to money markets were taken by investors as further evidence of credit market troubles.
“There are all these concerns about the credit market caused by the US subprime mortgage market and the drop in particular was caused by BNP suspending operations of a few funds,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Nymex crude has fallen by more than $7 a barrel since rallying to a new all-time high of $78.77 a barrel August last week. But some analysts say the decline is not surprising.
“The surge to nearly $80 was driven by a lot of positive momentum buying and not due to physical issues. The pricing was really overdone, there was too much froth in the market when we got to the new high, so the adjustment downwards was justified,” Shum said.
Oil prices were also retreating as US gasoline demand weakened, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
“Market sentiment is now quite weak, with the end of the summer driving season close and gasoline demand slowing,” Emori said. “It’s quite difficult to find bullish factors in the crude oil market at the moment.”
The crude market was still supported to some extent by physical concerns, Shum said.
“In the remainder of this third quarter there is still some potential upward exposure, such as the potential for hurricanes affecting the US Gulf of Mexico supply,” he said.
The US National Oceanic and Atmospheric Administration issued a new forecast Thursday that placed the chance of an above-normal hurricane season at 85%, up from 75% in May.
September Brent crude fell 35 cents to $69.86 a barrel on the ICE futures exchange in London.
Heating oil futures lost 0.32 cent to $1.986 a gallon (3.8 liters) while gasoline prices added 0.6 cent to $1.94 a gallon. Natural gas futures fell 3.6 cents to $6.55 per 1,000 cubic feet.
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First Published: Fri, Aug 10 2007. 07 42 PM IST