Oil prices drop into red

London, Sep 9: Oil prices in London fell today, one day after hitting an intra-day 16-month low on the back of ample supplies, dealers said. Brent North Sea crude for October slid 50 cents to USD 99.70 per barrel in late afternoon deals.

The contract had plunged yesterday under the psychological barrier of $100 to strike an intra-day low of USD 99.36 -- a level last seen on May 1, 2013. US benchmark West Texas Intermediate (WTI) for October delivery however gained 28 cents to USD 92.94 a barrel. "Brent is continuing on the downward trajectory that it has followed since mid-June, despite the geopolitical unrest -- after all, so far these risks have had little impact on the short-term supply situation," said Commerzbank analysts in a note.

"Indeed, the once again fragile ceasefire appears to be giving rise for the first time in months to some sense of calm in the conflict in Ukraine. "The Iraqi parliament has confirmed the new government of Prime Minister al-Abadi, which should go some way to easing the situation there. "In Libya too, production is recovering quickly despite ongoing fighting," they added.

Crude futures had fallen sharply on Monday on concerns over fragile energy demand -- following weak Chinese and Japanese data -- and on the back of the strengthening dollar. Imports by China showed a surprising drop of 2.4 percent, while Japan said its economy shrank 1.8 percent on-quarter in April-June, worse than the previously estimated contraction of 1.7 percent.

The dollar has meanwhile climbed sharply following disappointing US non-farm payrolls data on Friday. The yen also hit a six-year dollar low on Tuesday following weak Japanese growth figures and anaemic Chinese trade statistics.

"The strong dollar currently weighs heavily on market sentiment," added Sucden analyst Myrto Sokou. The rebounding greenback makes dollar-denominated commodities more expensive for buyers using weaker currencies. That tends to weigh on demand and prices. Sokou added that the key USD 100-per-barrel level was "crucial" for the 12-nation Organization for Petroleum Exporting Countries (OPEC).

AFP