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Oil price resumes decline

Oil fell to $114 a barrel on Monday, extending the previous session’s steep losses that were prompted by concern over rising supplies and weakening global demand.

Tension between the West and Russia over Georgia and expectations that the Organisation of the Petroleum Exporting Countries (Opec), which meets on September 9, would trim production should prices fall further limited the decline.

”I still think crude will retest $110, but not go much lower than that because of the fear that Opec will lower output were values to dip much below this level,” said Nauman Barakat, of Macquarie Futures USA.

United States crude fell by 64 cents to $113,95 a barrel by 2.45pm GMT. On Friday, it fell more than 5,4%, the largest one-day slide since December 27 2004. Brent crude lost 50 cents to $113,42 on Monday.

Oil has fallen from a record high of $147,27 reached in July on concern that high energy costs are taking a toll on global fuel demand. Prices remain up about 15% so far this year.

Moscow’s military intervention in Georgia has disrupted some shipments of Azeri oil through Georgia.

Russia, which began to pull out the bulk of its forces from Georgia last week, said on Saturday its troops would patrol one of Georgia’s main Black Sea ports, defying Western demands for a complete pullback.

Russian lawmakers on Monday urged the Kremlin to recognise two rebel regions of Georgia, a move seen as likely to worsen relations with the West. Russia said its troops would patrol one of Georgia’s Black Sea ports, Poti.

Comments from Opec member Iran supported prices on Monday. The group plans to prevent the falling market trend at its meeting on September 9 in Vienna, Iran’s oil minister said.

Venezuela said on Friday that Opec should consider cutting oil production at the meeting if it decides that recent price declines constitute a sustained downturn.

Opec, source of two in every five barrels of oil, boosted output further in August, according to industry consultant Petrologistics on Friday.

The dollar had earlier in the session lost ground against a basket of major currencies, but later steadied. A weaker dollar can boost demand for oil and commodities as a hedge against inflation. — Reuters

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