Oil prices slide after rally above 80 dollars

November 20, 2009 08:40:15 AM

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World oil prices retreated Thursday, one day after spiking above 80 dollars on news of falling American energy inventories, as traders banked profits and eyed the weakening US currency.

New York's main contract, light sweet crude for December delivery, fell 1.83 dollars to 77.75 dollars a barrel.

Brent North Sea crude for January delivery also dropped 1.63 dollars to 77.84 dollars a barrel.

Crude reserves in the United States -- the world's biggest energy consuming nation -- fell by 900,000 barrels in the week ending November 13, the Department of Energy announced on Wednesday.

The decline was more than the 600,000 barrels anticipated by the market.

US gasoline or petrol inventories tumbled 1.7 million barrels, confounding expectations for a small gain.

The DoE added that stockpiles of distillates, which include diesel and heating fuel, fell 300,000 barrels. Analysts had pencilled in a bigger drop of 500,000 barrels.

"The latest report included some mildly bullish (price-supporting) points for oil markets," analysts from the Commonwealth Bank of Australia said in a report.

However they cautioned that "the big picture remains one of still subdued US oil demand."

Analysts said the drop in inventory levels was exacerbated by Hurricane Ida, which weakened to a tropical storm earlier this month but led to the closure of some petroleum installations in the Gulf of Mexico.

The US is seen as key to lifting oil demand, which has been hit by the global economic slump.

Crude oil prices had soared 2.50 dollars on Monday owing to a weak dollar and data showing that the Japanese economy expanded 1.2 percent in the July-September period, traders said.

It was the second straight quarter of expansion in the world's second-largest economy.

Meanwhile, OPEC president Jose Maria Botelho de Vasconcelos has signalled that 75-80 dollar oil is an adequate level to allow for a global economic recovery.

The Organization of Petroleum Exporting Countries (OPEC) pumps about 40 percent of the world's oil.

The oil market has also this week followed events in oil-exporter Nigeria, where its main armed group has accused the military of staging a dawn raid on a village in the restive crude-producing region, saying it could threaten peace talks.