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Oil prices slide, stand at 123.26 dollars

Oil prices resumed their move downward on Friday on indications that demand is sagging amid slowing economies and fresh signs of rising supply.

business Updated: Jul 26, 2008 01:28 IST

Oil prices resumed their move downward on Friday on indications that demand is sagging amid slowing economies and fresh signs of rising supply.

New York's main contract, light sweet crude for September delivery, dropped 2.23 dollars to close at 123.26 dollars a barrel.

In London, Brent North Sea crude for September fell 1.92 dollars to settle at 125.02 dollars.

The benchmark New York contract has lost nearly 25 dollars since striking an all-time high level of 147.27 dollars on July 11. This week alone it shed 5.62 dollars.

Prices had risen Thursday in what traders described as a technical rebound following two days of heavy falls.

But the bears reappeared, analysts said, upon indications that the Organization of the Petroleum Exporting Countries, the cartel that produces 40 percent of the world's crude, was boosting supply despite softening demand.

"Saudi output is rising. Petrologistics reported that OPEC oil production is expected to rise by 200,000 barrels a day to a whopping 32.9 million barrels of oil a day," said Phil Flynn, analyst at Alaron Trading.

"Saudi production will rise to 13 million barrels of oil a day. The amazing thing about that is they are already having a hard time selling what they have."

Oil prices have shot to a series of record highs after crossing 100 dollars at the beginning of the year on concerns about supply stoked in part by geopolitical tensions over Iran's nuclear program and unrest in Nigeria, Africa's biggest oil producer.

However, most recently prices have eased as concerns mount about demand in the face of prolonged weakness in the US economy, the world's biggest energy consumer.

On Wednesday, crude futures had skidded some four dollars after a bigger-than-expected increase in US gasoline reserves heightened demand worries.

"The slide in crude (futures from recent highs) has been primarily driven by concerns of weaker demand as a result of higher prices, as economic problems persist," said Michael Davies at the Sucden brokerage in London.

"Originally these fears focused on the US, with data there showing significantly lower demand for gasoline, but economic data has started to point to problems in Europe and slower growth in the key drivers of oil demand growth: China and India."