Oil prices drop; supply worries persist

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AFP

LONDON — The price of New York crude tumbled Monday but managed to remain above US$80 per barrel amid tight energy supplies.

Elsewhere, a top official with the International Energy Agency warned there was “a strong likelihood” that short- and medium-term oil prices would remain high, citing demand-supply tensions and robust growth in China and India.

In Monday trade, New York’s main futures contract, light sweet crude for delivery in November, tumbled 93 cents to US$80.69 per barrel.

The price of Brent North Sea crude for November delivery shed 97 cents to US$78.32 per barrel in London trade.

“With the 2007 hurricane season not scheduled to end until Nov. 30, plenty of time remains for the weather to have an impact” on prices and send them rising again, said an analyst from the PVM Vienna Research Center.

New York oil prices struck a new peak of US$84.10 last week on fears a storm could threaten facilities in the Gulf of Mexico and because of tight supplies in the U.S., the world’s biggest energy user.

Brent hit a record high US$79.94 per barrel.

The weaker U.S. currency is also supporting oil prices as importing countries find it less expensive to purchase crude where the trade is denominated in dollars and their currency is stronger.

The dollar fell to a new all-time low of 1.4130 against the euro Monday on expectations that the U.S. Federal Reserve will further lower key interest rates after last week’s 50 basis points cut.

Regarding oil prices, the head of the IEA’s oil market unit, Didier Houssin, told French radio Monday that “in the very short term, there is a strong likelihood that prices will stay high.”

He cited “very dynamic demand” as well as “a supply situation that is stretched to meet demand as winter approaches.”

He also pointed to “the problem of hurricanes in the Gulf of Mexico.”

But he said there would later be opportunities for OPEC “to put more crude on the market,” which could check a price rise.

“The concerns that exist on developments in the world economy would justify an easing in the price of oil,” Houssin said.

“Until now the world economy has been able to manage high oil prices thanks to very strong growth momentum. But in a different context, it’s not certain that this would be sustainable,” he added.