Oil prices slump, ending brief rally

Jan	07
2009

Agence France-Presse | 10/03/2008 8:37 AM

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NEW YORK - Oil prices tumbled Thursday, with worries about demand returning to the fore amid critical credit strains in the global economy and a stronger dollar keeping a lid on prices.

New York's main contract, light sweet crude for November, slid 4.56 dollars to close at 93.97 dollars a barrel.

In London, Brent North Sea crude for delivery in November dropped 4.77 dollars to settle at 90.56 dollars a barrel.

"It's the same story that started earlier this week: fears of a very slow global economy," said Adam Sieminski at Deutsche Bank.

Traders worried that the financial crisis roiling markets and weighing on the US and European economies will erode demand for crude oil.

The US Senate's passage late Wednesday of a 700-billion-dollar bailout of financial firms did little to reassure the markets. On Wall Street, the Dow Jones Industrial Average of 30 blue-chip stocks plunged over three percent.

Approval of the bailout bill by the House of Representatives in a vote expected Friday was uncertain after the House rejected a similar measure Monday.

"If the economy slows down, and people don't have money to buy, and they don't buy oil, consumption will fall," Sieminski said.

John Kilduff at MF Global said that the "widespread sentiment that a serious global slowdown is underway should continue to work negatively on commodity prices."

"Alarm bells are going off around the world," he added.

In the US, the world's biggest energy consumer, oil demand has fallen 7.1 percent over the past four weeks compared with the same period a year ago, according to US Department of Energy (DoE) data.

Analysts at Merrill Lynch slashed their 2009 global oil demand growth estimates to 400,000 barrels per day.

According to them, a barrel of oil, in New York and London, would cost 90 dollars on average in 2009, down from a prior estimate of 107 dollars, and could fall as low as 50 dollars if there is a global recession.

Fresh gains in the dollar also pressured dollar-priced oil Thursday. The euro fell to a 13-month low at 1.3748 dollars.

as of 10/03/2008 8:37 AM