Oil prices fell on Thursday in Asia to US$96 a barrel on concerns the deepening turmoil in the US financial system will slow global economic growth and cut oil demand. Light, sweet crude for October delivery fell US$1.03 to $96.13 a barrel in electronic trading on the New York Mercantile Exchange midday in Singapore. Overnight, the contract rose US$6.01 to settle at $97.16, after dropping US$10.03 the previous two trading sessions.
Oil jumped overnight as investors fled equities to crude as a short-term safe haven amid global market turmoil. "Oil is not viewed as safe a haven as gold, but investors consider it safer than equities," said Victor Shum, an energy analyst with consultancy Gertz & Purvin in Singapore. "If these financial troubles lead to a world recession however, that's going to affect demand big-time."
The Federal Reserve earlier on Wednesday had sought to calm investor fears by rescuing troubled insurer American International Group Inc. with an US$85 billion bailout loan. The emergency measure came a day after Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer. Stepped up attacks by Nigerian militants against the country's oil infrastructure helped to support oil prices. In a fifth day of violence, Nigeria's main militant group said on Wednesday that it had destroyed an oil-pumping station and a pipeline crossing southern Nigeria in a rare daylight attack.
A spokesman for Nigeria's state oil company said on Wednesday that militant attacks are now cutting the country's daily oil production by about 1 million barrels a day, 40 per cent of what the country produced before the militant campaign began three years ago.
"In the last few days, militant attacks in Nigeria have been stirring up again, but that's on the back burner right now," Shum said. "I see downward pressure on oil in the near-term, with the key support level at US$90."
Also on Wednesday, the US government reported a bigger-than-expected drop in crude supplies, reflecting the shutdown of virtually all Gulf Coast oil production because of Hurricane Ike and Hurricane Gustav.
The Energy Information Administration said US crude stocks fell by 6.3 million barrels for the week ending Sept. 12, much bigger than the 3.7 million barrel drop expected by analysts surveyed by energy research firm Platts expected.
In other Nymex trading, heating oil futures fell 2.81 cents to US$2.7966 a gallon, while gasoline prices dropped 3.23 cents to US$2.4307 a gallon. Natural gas for October delivery rose 17.9 cents to US$8.089 per 1,000 cubic feet.
In London, October Brent crude rose 9 cents to US$94.93 a barrel on the ICE Futures exchange.