Friday August 14, 09:08 PM
Oil prices skid on weak US consumer confidence
NEW YORK (AFP) - Oil prices skidded Friday after a weak US consumer confidence reading dampened hopes for a pickup in energy demand in the world's largest energy-consuming country.
New York's main contract, light sweet crude for September, plunged to 67.51 dollars a barrel, down 3.01 dollars, or 4.3 percent, from its close Thursday.
In London, Brent North Sea crude for delivery in September fell 1.07 dollars to settle at 72.41 dollars a barrel.
After cautious opening trade, the New York benchmark contract nosedived after the University of Michigan reported its consumer sentiment index dipped to a preliminary 63.2 from 66.0 in August, confounding most analysts who had expected it to rise to 69.0.
The grim consumer sentiment reading shook US and European stock markets, and sent the dollar higher as investors fled for the safe haven of the US currency.
The stronger dollar made dollar-priced oil more expensive, weighing on prices.
The report raised further red flags on consumer spending, the main driver of the US economy and key to its recovery from the worst recession since the Great Depression.
It followed government data Thursday showing retail sales fell unexpectedly in July, underscoring the weakness in consumer demand.
The oil market slump was "a reflection of people thinking that spending will still remain under pressure and that demand will not recover as fast as some people had thought," said Andy Lipow of Lipow Oil Associates.
Both the Organization of the Petroleum Exporting Countries and the International Energy Agency this week had reiterated they saw a rebound in crude oil demand, after two years of declines.
But analysts note the scale of the recovery was likely to be limited.
Traders found new reasons for optimism this week after the US Federal Reserve said it saw some stabilization in US economic activity and Germany and France, the two biggest eurozone economies, shockingly returned to growth in the second quarter.
"After the Fed meeting, there was optimism that the worst is over," said Phil Flynn of Alaron Trading.
"But now the market says: wait a second, there is still weakness in retail sales and in the consumer confidence."
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