19 Jul 2008

Oil prices ease after plunge on demand worries

11:13 am on 19 July 2008

Oil prices fell for the fourth day in a row on Friday, as tensions eased between Iran and the West and on growing concerns that a sluggish economy will slash demand.

New York's main oil contract, light sweet crude for August delivery, slipped US41 cents to close at $US128.88 a barrel. From Tuesday to Friday, New York crude had plunged more than $US15.

In London, Brent North Sea oil for September delivery dropped US88c to settle at $US130.19.

Investors abandoned oil in droves as the impact of the economic slowdown - both current and future - suddenly loomed high on traders' radar screens. Prices have plummeted since striking record highs above $US147 a barrel exactly a week ago.

Traders worried that the slowing American economy would translate into lower demand from the world's biggest energy consumer.

Oil traders are focused on Geneva, where the European Union's foreign policy chief, Javier Solana, was to hold talks at the weekend with Iran's nuclear negotiator, Saeed Jalili, on Iran's contested nuclear programme.

The United States and other major powers have been locked in a long-running standoff with Iran over its nuclear drive, which they suspect is aimed at making weapons.

Iran has repeatedly rejected demands to suspend uranium enrichment, insisting that its activities are exclusively aimed at energy production. The Islamic republic is the world's fourth biggest producer of crude oil, and tensions over its nuclear effort have helped push prices to record highs recently.

NZ petrol prices down

In New Zealand, Gull Petroleum dropped its prices by 1 cent on Friday in response to the US fall. It is now charging $NZ2.13.9 cents a litre for 91 octane and $NZ1.86.9c a litre for diesel.

On Thursday BP, Shell, Caltex and Gull cut prices by 4c a litre. Shell and Caltex say they have no plans to drop prices further at this stage

It is the first time the price of petrol and diesel at the pump has come down since February this year.