Oil prices settle at three-month low

08:55, May 14, 2010      

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Crude price fell to the lowest level in three months on Thursday amid worries about European debt problems and weak demand in the world's top oil consumption country.

Light, sweet crude for June delivery fell 1.25 U.S. dollars to settle at 74.40 dollars a barrel on the New York Mercantile Exchange.

Crude futures dropped to as low as 73.62 dollars a barrel during trading. The front contract is 4.59 dollars lower than the July contract, the widest divergence between front month contracts since February 2009. The spread between the June and December contracts is 10.44 dollars, a contango encouraging buyers to store barrels.

In London, Brent crude for June delivery lost 1.09 dollars to 80.11 dollars a barrel on the ICE Futures Exchange.

Brent, usually cheaper than Nymex futures, is trading at a 5.60- dollar-a-barrel premium, the most since Feb. 17, 2009.

Analysts believe that high oil supplies in Cushing contributed to the price premium between the NYMEX and Brent crude futures.

Data showed that oil supplies in Cushing, Oklahoma, where the New York-traded West Texas Intermediate oil is stored, rose to the highest level since the Energy Department began recording in 2004.

Oil prices in New York trading fell further on Thursday, as the euro weakened against the dollar on worries that harsh fiscal tightening in Europe would lead to slower growth in the region.

Portugal lowered its budget-deficit goal for 2011 to 4.6 percent and approved tax increases and spending cuts. The government maintained a 7.3-percent deficit target for 2010, Prime Minister Jose Socrates said on Thursday at a press conference in Lisbon. On Wednesday Spain announced plans to reduce the deficit to 6 percent of GDP in 2011 from 11.2 percent last year.

A strengthening greenback, which moved close to a 14-month high against the euro, curbed investors' appetite for riskier assets like energy commodities.

Meanwhile a continuous buildup in U.S. fuel inventories weighed on the market. The U.S. Energy Department Energy Information Administration reported on Wednesday that during the week ended on May 7, crude stockpiles rose by 1.95 million barrels to 362.5 million barrels, the highest level since the week ended on May 29, 2009.

Stockpiles of crude oil were forecast to climb by 1.6 million barrels, according to the median of 17 analyst responses in a Bloomberg News survey.

The U.S. commercial crude inventory has risen in 14 out of the past 15 weeks. And last week's gain has put current supply 6.1 percent higher than the five-year average for the period.



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