/ 21 March 2008

Oil extends slide on economic worries

Oil prices extended a week-long slide on Thursday, briefly tumbling below $100 a barrel for the first time in two weeks amid growing concerns an economic slowdown in top consumer the United States would cut global energy demand.

US crude settled down 70 cents to $101,84 a barrel after falling as low as $98,65 earlier in the session, the first time below $100 since March 5. London Brent fell 34 cents to $100,38 a barrel.

US oil prices have been in steady retreat since hitting a record $111,80 a barrel on Monday as signs of an economic slowdown mount, raising the possibility of a sharp slowdown in world demand for commodities.

Some banks may have also tightened credit and increased margin calls, forcing selling, some analysts said.

”We continue to see profit-taking among commodities. There are also macro-economic concerns about the economy and the dollar has been doing better,” said Mike Wittner, global head of oil market research in London for Société Générale.

Gold dropped more than 4% to a one-month low earlier, while platinum slid more than 5% to $1 820 an ounce, the lowest level since early February, as funds cashed in.

Oil and other commodities have struck a series of record highs since the beginning of the year as investors fled stock markets and took refuge in dollar-denominated assets.

But investors nervous about the economy are cashing in on recent record prices in commodities and energy markets.

”Commodity players seem to be coming round to the notion that the deterioration in the US macro picture cannot be ignored,” Edward Meir said in a daily note by MF Global.

Weekly US stocks data released on Wednesday showed lower fuel stocks than forecast, but the figures also revealed a fall in demand.

US demand for fuel over the past four weeks was 0,1% below last year, while distillate demand was running more than 5% below last year, the US Energy Information Administration figures showed.

Adding to the gloom, US government data showed on Thursday that the number of jobless staying on aid rolls rose to the highest in three and a half years to 378 000, higher than the expected 360 000, possibly partly due to an auto industry strike.

”We believe that the combination of low economic growth in the United States and high oil price inflation will have its strongest impact on demand in the first half of the year,” Goldman Sachs said in a note. – Reuters