Oil prices drop after breaching $73

By AFP

July 15, 2010 Updated Jun 14, 2009 at 9:41 PM CDT

Oil prices fell on Friday on profit-taking and a rise of the dollar, one day after striking 2009 peaks above 73 dollars on signs of recovery for energy demand, traders said.

The OPEC oil producers' cartel on Friday said that the worst of the impact from the economic crisis was past for the oil markets, as it fractionally reduced its demand estimate for 2009.

New York's main futures contract, light sweet crude for delivery in July, sank 1.26 dollars to 71.42 dollars a barrel. The contract had hit 73.23 dollars on Thursday -- which was the highest level since last October.

In trading here on Friday, Brent North Sea crude for July delivery shed 1.20 dollars to 70.59 dollars, after touching 72.27 the previous day.

On the foreign exchange market, the dollar rose against the euro after downbeat eurozone economic data. That makes dollar-priced crude more expensive for foreign buyers, eventually leading to weaker prices.

The Organization of Petroleum Exporting Countries wrote in its latest monthly report on Friday: "In light of the considerable challenges the world economy and commodity markets, particularly the oil market, have undergone, the worst appears to be behind us."

It added: "As the world economy stabilises, the world oil demand appears to be settling down."

OPEC estimated that demand would contract by 1.62 million barrels per day (bpd) or 1.89 percent in 2009 -- only a marginal downward revision in demand from its earlier forecast.

In its previous monthly bulletin released in May, OPEC had been pencilling in a contraction of 1.57 million bpd or 1.83 percent for 2009.

New York crude had soared above 73 dollars on Thursday after the International Energy Agency (IEA) raised projections for world oil demand by 120,000 barrels per day to 83.3 million in 2009, up from its 83.18 million forecast in May.

"Crude oil rose above 73 dollars following an upward revision in global oil demand by the IEA in their monthly report and following some positive US data which boosted sentiment," said Sucden analyst Nimit Khamar.

"US data showed a better than expected rise in retail sales and a slowdown in initial jobless claims, which continued to fuel the appearance of an economic recovery."

There was also upbeat news from China, which is the second-biggest energy consuming nation after the United States.

"A 5.5-percent rise in Chinese crude imports in May compared to a year ago levels also supported markets yesterday," added Khamar.

This week, oil prices have also surged past 71 and 72 dollars as traders tracked plunging American crude reserves, a weak dollar and hopes of a recovery in global energy demand.

The US Energy Information Administration reported that US crude inventories had tumbled 4.4 million barrels last week.

That was far more than market expectations of a 700,000-barrel drop and stoked hopes of a recovering global economy and rebounding energy demand.

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