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Oil Prices Dive on Stronger Dollar | ASHARQ AL-AWSAT English Archive 2005 -2017
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LONDON (AFP) – World oil prices slumped on profit-taking on Friday, after hitting two-year highs the previous day, as traders took their cue from a stronger dollar and speculation over a Chinese interest rate rise.

New York’s main contract, light sweet crude for December, fell as low as 85.51 dollars per barrel, before recovering to 86.62 dollars, down 1.12 dollars from Thursday’s closing level.

Brent North Sea crude for December dropped 95 cents to 87.86 dollars in London trade.

“The price of (New York crude) has shed more than two percent … and dropped below the 86-dollar mark after reaching a two-year high yesterday (Thursday),” Commerzbank analyst Carsten Fritsch said.

“This price slump can be explained by a general weakness of commodity prices, triggered by the stronger US dollar, and rumours of an imminent interest rate hike in China.”

World stock markets meanwhile dropped on Friday and the euro slid against the dollar, as investors fretted over indebted eurozone nations, despite EU heavyweights rushing to downplay those concerns at the G20 meeting in Seoul.

A stronger dollar makes it more expensive for investors holding other currencies to buy dollar-denominated commodities like crude oil.

In recent weeks, the energy market has been buoyed by a weaker dollar and the prospect of a stronger-than-expected global economic recovery.

Traders also absorbed the latest demand forecasts from the International Energy Agency (IEA) on Friday.

The IEA raised its 2010 global oil demand growth forecast to an average of 87.3 million barrels per day, partly due to a stronger-than-expected rebound in the third quarter, but pointed to a modest slowdown in 2011.

The Paris-based IEA is the energy monitoring and strategy arm for the world’s leading industrialised nations that comprise the Organisation for Economic Cooperation and Development (OECD).

“Forecast global oil demand growth for 2010 is revised up by 0.2 million barrels per day to 2.3 mbpd on higher-than-expected (third quarter) data in the OECD and slightly stronger readings in the non-OECD,” the IEA said Friday in a report.

“Assuming no recurrence of the weather-induced third-quarter surge, 2011 growth is set to slow to 1.2 mbpd … with demand averaging 88.5 mbpd versus 87.3 mbpd in 2010.