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Oil prices fall amid strong supplies

business Updated: Sep 11, 2009 18:46 IST
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Oil prices fell on Friday as traders banked profits following a week in which crude futures have won support from increased signs of economic recovery.

New York's main contract, light sweet crude for October delivery, dropped 12 cents to 71.64 dollars a barrel. Brent North Sea crude for October delivery dipped eight cents to 69.78 dollars a barrel in London trade.

With prices falling on Friday, one analyst predicted further losses ahead.

"We continue to believe that the downside risk is higher than the upside risk from the current price levels for the coming months" amid strong supplies, Torbjorn Kjus, oil analyst for DnB NOR Markets, said in a report.

On Thursday, the Organization of Petroleum Exporting Countries (OPEC) decided to maintain its production levels as it deemed the market to be "oversupplied".

The global economic downturn has sapped demand for energy, dragging crude prices from record highs of above 147 dollars in July 2008 to 32.40 dollars in December. They have since recovered to hover around 70 dollars.

Oil prices had edged up on Thursday amid a weakening dollar and falling crude inventories in the United States, the world's largest oil-consuming nation. Market sentiment was also boosted by International Energy Agency forecasts of higher global oil demand.

A weekly government report showing easing crude inventories and higher gasoline and other stockpiles in the United States lifted market sentiment, analysts said. Crude inventories fell by 5.9 million barrels last week, nearly four times more than expected, data from the US Energy Information Administration said.

But gasoline stockpiles unexpectedly rose 2.1 million barrels -- analysts had forecast a drop of 1.3 million barrels -- and distillate stocks, including diesel and heating oil, rose two million barrels, more than the expected 600,000 barrels.

The International Energy Agency meanwhile raised its forecasts for global oil demand in 2009 and 2010 largely because of stronger-than-expected economic data from China and the United States.

The forecasts went up nearly 0.5 million barrels per day for both 2009 and 2010 to 84.4 mbpd and 85.7 mbpd, respectively, the Paris-based IEA said in its monthly oil market report. But it warned that the economic recovery would be slow.