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Oil prices slide under $105

Oil prices fall below $105 on concerns over slowing energy demand and a strong US currency, while the market awaited next week's OPEC meeting on crude output levels.

business Updated: Sep 05, 2008 22:45 IST

Oil prices fell below $105 on Friday on concerns over slowing energy demand and a strong US currency, while the market awaited next week's OPEC meeting on crude output levels, traders said.

Brent North Sea crude for delivery in October dropped 97 cents to $105.33 a barrel in electronic deals after slipping under $105 earlier in the day.

New York's main contract, light sweet crude for October, fell 96 cents to $106.93 a barrel in pit trading.

"Crude prices featured on the downside on persistent concerns over weakening oil demand and as the US dollar continued to appreciate," said Nimit Khamar, an analyst at the Sucden brokerage in London.

"The outlook for global economies is looking far from rosy, and is fuelling concerns over demand destruction and pushing oil prices lower.

"OPEC is set to meet on 9th September (Tuesday), with many market participants expecting them to reduce production to prevent over supply," Khamar added.

The dollar struck a near 11-month high versus the euro on Friday on news of slumping industrial output in Germany, Europe's biggest economy, and as the market awaited key US jobs data, traders said. The dollar's swift rise was then checked when the disappointing US unemployment figures came.

The euro was down at $1.4267 in late afternoon London trade, after earlier hitting the lowest level since October 24, 2007.

A strong US currency makes dollar-priced oil more expensive for buyers holding weaker currencies, dampening demand for crude, which is already falling because of a global economic slowdown.

The Organization of the Petroleum Exporting Countries (OPEC) meets next week amid speculation that the group which produces 40 percent of the world's oil may decide to cut output as prices slide toward 100 dollars.

OPEC member Libya said Friday that the oil market was starting to suffer from oversupply.

"The market is well served and has even started to suffer from oversupply," said Libya's oil minister Shukri Ghanem.

Brent crude had ended down nearly two dollars on Thursday as the dollar began strengthening against the euro on eurozone economic woes, while the market shrugged off a larger-than-expected decline in US energy stockpiles, dealers said.

The dollar also found support in a survey by the Institute for Supply Management showing US service sector activity rebounded unexpectedly in August.

Many analysts expect oil prices to continue to fall because of fears of recession in the United States and Europe.

Crude oil, which hit a record high 147.27 dollars on July 11 in New York, has lost nearly 40 dollars in less than two months.

Oil prices had broken through 100 dollars a barrel for the first time at the start of January on geo-political concerns, notably surrounding the ongoing nuclear power dispute between the West and Iran, which is a major producer and exporter of crude oil.