Sunday, July 5, 2009

Oil Prices Dip Below $65 in Asian Trade

. Sunday, July 5, 2009

By stockOzone team

Oil prices extended their losses in Asian trade on Monday after the latest unemployment report in the United States showed that a recovery in the world's biggest economy is unlikely to come soon.

In morning trade, New York's main contract, light sweet crude for August delivery, was down $1.89 to $64.84 a barrel.

Brent North Sea crude for delivery in August dropped $1.01 to 64.60.

Both contracts were down from their highest level this year of more than $73 a barrel reached last Tuesday.

"Prices are extending their looses from last week based on the poor jobs report in the United States," said Tony Nunan, an energy risk manager with Mitsubishi Corp in Tokyo.

"People are starting to wonder about the strength of the US economic recovery... This does not look good for oil demand because it means that consumer spending will remain weak."

A closely watched US Labor Department report last week showed US job losses had surged worse than expected to 467,000 in June, pushing the unemployment rate to a new 26-year high of 9.5%.

The report, seen as one of the best indicators of economic momentum, reversed the improvement seen the previous month when job losses fell to 322,000.

Nunan said profit-taking amid a global supply glut was also helping push down prices.

"People realized that maybe the market is getting ahead of itself with oil at $70 a barrel. Inventory levels worldwide and in the United States are still very high so probably people realized that this is a good time to take profit," he said.

The focus on economic recovery and robust oil inventories worldwide have minimized the impact of fresh attacks by Nigerian rebels on the country's oil facilities.

Nigerian militants said Monday they had destroyed a strategic facility owned by US oil group Chevron, just hours after they claimed responsibility for an attack on Anglo-Dutch oil giant Shell in the restive Niger Delta.

Oil prices are currently down about 56 percent from historic peaks of more than $147 a barrel reached in July last year after the global economic and financial crisis dampened energy demand.

Disclosure: Author does not own any of the stocks discussed here.

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