18 Jul 2008

Oil prices continue to tumble

2:01 pm on 18 July 2008

Oil prices in New York have fallen below $US130 a barrel for the first time in more than a month, boosting world markets knocked by inflation fears and a shaky US economy.

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.

The prospect of slower economic growth in the United States is seen as dampening demand for energy. Rising US stockpiles of crude oil and easing political tensions between Iran and the West over the oil producer's nuclear programme continue to affect oil markets.

New York's main oil contract, light sweet crude for August delivery lost $US5.31 to close at $US129.29 a barrel on Thursday. It has tumbled more than $US15 since Monday. Last week, it reached an all-time high of $US147 a barrel.

Natural gas prices are also plunging - down more than 20% since the peak earlier in July.

Thursday's fall in oil prices marks the biggest three-day loss in dollar terms since oil futures started trading in New York in 1983.

Markets buoyant

It has been a boon to world stock markets that have recovered some ground after being hard-hit by mounting fears over inflation and the health of the United States banking sector.

Wall Street surged higher for the second day in a row on Thursday, as oil prices continued to tumble. The Dow Jones Industrial Average rose 207.38 points or 1.85% to close at 11,446.66, a day after a powerful rally of more than 2.5%.

The New Zealand sharemarket was enjoying another day of strong gains on Friday after the Wall Street result. The NZX 50 was up 28 points to 3119 on turnover of $37 million at 1.10pm.

Britain's FTSE 100 closed at 5,286.3 points, up 135.7 or 2.63%, while in Europe the FTSEurofirst 300 index closed 2.7% higher at 1,145.87 points on Thursday.