Monday July 7, 06:36 PM
Oil prices plunge under 140 dollars
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LONDON (AFP) - Oil prices dived below 140 dollars a barrel on Monday as the US currency firmed and tensions eased over major crude producer Iran, analysts said.
New York's main oil contract, light sweet crude for August delivery, slumped 5.64 dollars to 139.65 dollars a barrel in pit trading. The contract had punched a life-time high of 145.85 dollars on July 3.
On Monday, Brent North Sea crude for August fell 3.83 dollars to 140.60 dollars a barrel in electronic deals. Brent had struck a record high 146.69 dollars last Thursday.
US floor trading had shut last Friday owing to Independence Day in the United States.
Oil futures slid on Monday, "with New York catching up with Brent as traders in America were coming back to work after a long holiday weekend," said Sucden analyst Andrey Kryuchenkov.
"The greenback was stronger (on Monday), extending gains from the end of last week and helping to put more pressure on oil prices," he added.
A strengthening US currency makes dollar-priced crude more expensive for buyers using weaker currencies, dampening demand for oil.
The dollar rallied against major currencies on Monday after US President George W. Bush, speaking over the weekend ahead of a Group of Eight (G8) summit in Japan, said his administration backed a "strong" dollar.
Oil blazed a record-breaking trail last week, driven by geopolitical tensions over Iran, a weaker US dollar and tightening global supplies, traders said.
Sky-high oil prices -- which ramp up the cost of petrol, jet fuel, and domestic electricity and gas -- cause higher inflation and slow economic growth. They have also sparked protests around the world.
The G8 rich nations -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- opened a summit Monday aimed at battling rocketing oil and food prices that threaten to derail the global economy.
Over the weekend meanwhile, Iran offered to negotiate on its nuclear drive but without a freeze on uranium enrichment, in its first comments since responding to an international package aimed at ending the standoff.
EU foreign policy chief Javier Solana said Monday he hoped to meet later this month with Iran's top nuclear negotiator, after Tehran gave its response to a package of incentives to halt uranium enrichment.
"Following the news that Iran may be prepared to compromise on its nuclear development programme, oil prices are a little softer," said analysts at the John Hall Associates energy consultancy in London.
"However, the region accounts for a sizeable portion of global production so until more definite news of a compromise is forthcoming then prices will continue to attract a premium."
Iran, the world's number four crude producer, is locked in a standoff with the West over its nuclear energy programme. The country claims it is for generating electricity while Western nations fear the development of nuclear weapons.
Six (Stockholm: ECOV-B.ST - news) world powers are offering Iran technology and negotiations if it suspends uranium enrichment.
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