Friday July 3, 01:59 PM
Oil prices drop further as 'rogue' trader probed
LONDON (AFP) - Oil prices fell further on Friday, but losses were less severe than a day earlier when traders had sold heavily on fresh worries about the weakness of the US economy.
Meanwhile oil market officials here launched a probe into an alleged rogue trader who this week helped push prices to eight-month peaks, costing his company nearly 10 million dollars (7.15 million euros).
In early London trade, Brent North Sea crude for delivery in August dropped 22 cents to 66.43 dollars a barrel.
New York's main contract, light sweet crude for August delivery, dipped 15 cents to 66.58 dollars a barrel.
Crude futures had sunk more than two dollars on Thursday as weak US jobs data quashed hopes of a speedy economic recovery in the United States, which is the world's top energy consumer.
"The US employment report was a negative for the oil price," said David Moore, a commodity analyst with the Commonwealth Bank of Australia.
Data released Thursday showed US job losses surged to 467,000 in June, pushing the unemployment rate to a 26-year high of 9.5 percent.
Since the recession began in the United States in December 2007, the world's biggest energy user has lost 6.5 million jobs and the jobless rate has risen 4.6 percentage points.
"Risk aversion returned with a vengeance yesterday after a disappointing US labour market report for June," said Dariusz Kowalczyk, chief investment strategist with SJS Markets trading firm.
Oil prices are likely to remain under pressure until economic data point to a firm turnaround in US fortunes, which will in turn lead to stronger energy demand, analysts said.
"Beyond any help arising from equities... crude oil market fundamentals look fragile. No doubt, a rally in equities or a weaker US dollar could support higher oil prices," Merrill Lynch (NYSE: MER - news) analysts said in a report.
"But anyway you cut it, oil demand is still extremely weak.... In sum, we believe oil prices will struggle to push higher over the next three months," they said.
A weak US unit makes dollar-priced oil cheaper for buyers using stronger foreign currencies, and this usually pushes up demand and crude futures prices.
ICE Futures Europe, London's oil market, is meanwhile investigating Tuesday's unauthorised trade, after which crude futures surged above 73 dollars a barrel.
David Peniket, president and chief operating officer of ICE Futures Europe, on Friday said his body investigated unusual trading activity as a "matter of course."
An oil brokerage, PVM Oil Associates, said on Friday that it was investigating suspected unauthorised trading within its company.
PVM was forced to unwind the series of unauthorised trades -- a move that in turn contributed to a sharp drop in prices, analysts said.
"The rogue oil trade on Tuesday just goes to show how easy it is to squeeze the market under thin trading conditions," said ETX Capital analyst Manoj Ladwa.
"Brent crude spiked above 73 dollars per barrel as a trader purchased the equivalent to 9.0 million barrels. The subsequent fall in price was due to PVM Oil Associates unwinding the position."
In early morning trade on Tuesday, London's Brent oil had spiked to 73.50 dollars -- the highest level so far this year and an eight-month peak.
New York crude had soared early Tuesday to 73.38 dollars -- which was also last seen in October.
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