Oil prices falter on energy demand outlook

Oil prices faltered on Wednesday as traders worried about the weak global economy and the outlook for energy demand, analysts said.

New York's main futures contract, light sweet crude for delivery in March, fell 11 cents to 34.82 dollars a barrel.

Brent North Sea crude for April delivery added a marginal four cents to 41.07 dollars per barrel.

Oil had tumbled in value on Tuesday, mirroring steep falls in equity markets, as traders were gripped by energy demand worries in a worldwide economic downturn.

Investors also fretted over the effectiveness of a new US economic stimulus law and the health of the US banking system, while two automakers raced to submit restructuring plans.

Data on manufacturing activity in the New York region deepened the gloom, showing a fall in the Empire State index to another record low in February.

"Crude futures suffered heavy losses (on Tuesday), slipping lower on renewed fears over the global economy," said analyst Andrey Kryuchenkov at VTB Capital in London.

"It was the first trading day in New York after the long holiday weekend and pessimism was overwhelming everything, even increasing calls from OPEC on the possibility of further supply cuts."

Floor trading on the New York Mercantile Exchange was shut on Monday for a public holiday in the United States, which is the world's biggest energy consuming nation.

As a result, the keenly-awaited weekly US energy report will be published on Thursday, one day later than normal.

On Wednesday, meanwhile, New York crude was not far from the 32.40 dollars per barrel hit on December 18 and which marked the lowest point in nearly five years.

"The dominant factor has been the international economy in relation to oil prices," said David Moore, a commodity strategist for the Commonwealth Bank of Australia.

Crude oil prices have slumped from record highs above 147 dollars a barrel reached last July, as the market has been slammed by plunging demand for energy amid the global financial crisis.

The Organization of Petroleum Exporting Countries (OPEC), which pumps 40 percent of the world's oil, cut output late last year by a total 4.2 million barrels per day in a bid to prevent further price falls.

Source: AFP

Other news