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Oil prices drop over $3 in Asian trade

Oil prices drop over $3 in Asian trade
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First Published: Tue, Sep 16 2008. 09 08 AM IST
Updated: Tue, Sep 16 2008. 09 08 AM IST
AFP
Singapore: Oil prices dropped more than $3 a barrel in Asian trade on Tuesday after the collapse of US investment bank Lehman Brothers accentuated fears for global economic health, analysts said.
New York’s main contract, light sweet crude for October delivery, plunged $3.95 to $91.76 a barrel following a fall of $5.47 to $95.71 at the New York Mercantile Exchange on Monday.
Brent North Sea crude for November delivery dropped $3.32 to $90.92. The October contract, which expired Monday, tumbled $5.20 to close at $92.38.
Analysts from Societe Generale said: “The financial sector crisis has revived fears of systemic risk and, more directly, is probably having some impact on oil and commodities trading and prices.”
The collapse of Lehman Brothers and the $50 billion takeover by Bank of America of ailing Wall Street investment bank Merrill Lynch continue to reverberate.
John Kilduff, an analyst at MF Global, said the Lehman and Merrill cases “are deepening concerns about the global economy and its effect on energy demand.” He said there appears to be a preference for more liquid assets which represent a safe haven.
Interest rates
Analysts expect the US Federal Reserve to cut interest rates by at least 25 basis points when the central bank meets later Tuesday for a routine policy meeting. But they say that may not be enough to calm investors.
Despite the plunge in oil prices, the Asian Development Bank (ADB) warned Tuesday that it expected oil to stay at $100 or more a barrel on a long-term basis.
“While there will be short-term fluctuations, the unmistakable long-run trend is prolonged periods of high real oil prices and pronounced price volatility,” the ADB said.
“The days of cheap oil are over.”
Analysts have blamed worries over slowing global economic growth and resultant easing of energy demand for a drop in oil prices from record highs above $147 in July.
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First Published: Tue, Sep 16 2008. 09 08 AM IST