Oil prices sink under $70 in London


July 15, 2010 Updated Jun 15, 2009 at 5:01 AM CDT

Oil prices fell under 70 dollars here on Monday as traders cashed in profits from last week's big rally, dealers said.

London Brent North Sea crude for July delivery dropped 1.01 dollars to 69.91 dollars a barrel.

New York's main futures contract, light sweet crude for delivery in July, sank 1.28 dollars to 70.76 dollars per barrel.

Crude oil had soared above 73 dollars a barrel last week, hitting a 2009 peak of 73.23 dollars in New York last Thursday -- the highest level since October -- amid hopes of a global economic recovery.

"Prices have rallied so much despite weak overall fundamentals (of supply and demand), so traders are taking profit," said Victor Shum, senior principal of energy consultants Purvin and Gertz in Singapore.

Shum added that the market was "ripe for a correction" after its bullish run, but prices were still heavily dependent on the value of the US dollar.

"The movement of the dollar will play an important role in driving oil," he said, noting that last week's rallies had primarily occurred against the backdrop of a weakening greenback.

A weaker dollar makes crude cheaper for buyers holding stronger currencies. That tends to stimulate demand and push the market higher.

Last week, oil had also jumped higher after the International Energy Agency raised projections for world oil demand by 120,000 barrels a day to 83.3 million in 2009, up from its 83.18 million forecast in May.

Additional support came from sliding crude oil inventories in the United States, which is the world's biggest energy consuming nation.

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