Singapore: Oil prices weakened in Asian trade Wednesday, 8 August, as speculative funds dashed for the exit amid concerns that problems in the US housing market could slow US growth, dealers said.
At 2:55 pm (0655 GMT), New York’s main contract, light sweet crude for September delivery, was down 21 cents to $72.21 a barrel from $72.42 in late US trades Tuesday.
Brent North Sea crude for September delivery fell 41 cents to $71.39.
“The reason why the funds (were buyers for oil) in the first place was expectations that the economy would see continued strong growth, keeping pressure on the oil on the supply side,” said Phil Flynn, an analyst with Alaron trading house.
“If the funds expect that demand will soften, then supplies of oil are more than ample,” he said.
The US housing slump plus financial turbulence caused by the troubled sub-prime mortgage market have triggered concerns of weaker economic growth which will reduce demand for oil.
“Market participants are concerned about slowing demand in the top consumer (market), especially after a report showed weaker than expected jobs growth in the United States (last Friday), further dampening hopes for a soft landing for the economy,” Sucden analyst Michael Davies said.
“It seems that, contrary to many previous views, troubles in the sub-prime mortgage market are spilling over into other sectors, including commodities and energy, as investors become increasingly risk averse and pull funds out of the market to protect profits or cover losses,” he added.
Crude futures have retreated by nearly seven dollars in a week since New York oil hit its all-time high.
Oil prices rose by more than 20% during June and July on concerns over rising geopolitical tensions, falling US crude stocks, growing US demand for motor fuel and expectations that crude demand would rise strongly this year.