Oil slides continue amid gloomy demand picture

08:33, August 13, 2010      

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Oil prices fell sharply for the third day on Thursday after rising jobless data exacerbated investors' concern that weak economy would cut back on energy consumption.

The U.S. Labor Department reported on Thursday that the total number of people applying for unemployment benefits for the first time rose by 2,000 to 484,000 last week, the highest level in nearly six months. The second straight increase came while economists were expecting a drop, and a weak job market usually dampens investors' confidence in energy consumption revival.

Light, sweet crude for September delivery fell 2.28 U.S. dollars, or 2.9 percent, to settle at 75.74 dollars a barrel on the New York Mercantile Exchange.

Brent crude for September delivery fell 2.14 dollars to 75.50 dollars a barrel on the ICE Futures Exchange in London.

Crude futures started to tumble on Tuesday after data showed China's crude import dropped in July. Oil prices have lost about seven percent in three sessions, falling from 81.48 U.S. dollars to 75.74 dollars.

Oil prices have been pressured by a series of negative reports this week. Official data showed that gasoline inventory rose by 400,000 barrels to 223.4 million barrels last week, the highest level of the past year on Aug. 6. Meanwhile, distillate fuels, which include diesel and heating oil, also increased by 3.5 million barrels. Investors were mostly worried about a buildup in gasoline inventories as it is still the summer driving season.

In its latest monthly report released on Wednesday, the International Energy Agency (IEA) slightly boosted forecasts for global crude demand for 2010 and 2011. But it warned that the world energy consumption remained vulnerable to a weaker global economy.

Another factor weighing on oil prices was the dollar, which gained momentum against a basket of major currencies this week. Risk aversion dominated the market, and the dollar index rose nearly 2 percent on Wednesday. It was the greenback's largest one- day gain since December 2008. Usually a strong greenback limits energy commodities' appeal as an alternative investment.



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