Oil prices drop on weak demand concerns

LONDON, Aug 10, 2009 (AFP) - Oil prices fell Monday on concerns about a pick-up in energy demand despite better-than-expected US unemployment data last week, analysts said.

New York's main contract, light sweet crude for delivery in September fell 42 cents to 70.51 dollars a barrel.

Brent North Sea crude for delivery in September dipped 24 cents to 73.35 dollars.

"Crude prices are a little lower in-line with equities and amid concerns over product demand," said Nimit Khamar, analyst at Sucden Financial Research, referring to a drop in sales of fuel to power cars and planes.

Victor Shum, senior principal at energy consultancy Purvin and Gertz, said weak demand would continue to impact oil prices that have gained recently on hopes of an end to the downturn being in sight.

"In the near term we may see some retreat in oil" prices, Shum said on Monday.

"I think the oil market will continue to be influenced by this fight between weak fundamentals (of supply and demand) and the drive from stock markets which are based on expectations of an economic recovery," he added.

Investors were looking for fresh leads from a two-day US Federal Reserve monetary policy meeting that ends Wednesday.

Analysts at Capital Economics said it would be "too soon" for the Fed "to consider tightening policy when unemployment has further (room) to rise and the latest GDP revisions show that the recession was deeper than previously thought."

US gross domestic product (GDP) showed a 6.4 percent decline in the first quarter, worse than the previous estimate of a 5.5 percent drop.

The United States, the world's biggest energy-consuming nation, had on Friday reported that its jobless rate fell one tenth of a point to 9.4 percent in July as job losses narrowed to 247,000 from 443,000 in June.

Analysts tempered optimism surrounding economic recovery, however, saying the world's biggest economy would still take some time to bounce back from the worst downturn in decades, dampening hopes of a rebound for energy demand.

Oil prices reached an all-time peak of more than 147 dollars a barrel in July last year before plummeting, as the economic slump that started in the second half of 2008 hit energy demand.

Source: AFP

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