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June 13, 2008
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Friday
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Jamadi-us-Sani 08, 1429
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Oil prices plunge by $4 per barrel
LONDON, June 12: Oil prices fell sharply on Thursday as the dollar strengthened on another highly volatile day on world oil markets.
New York's main oil futures contract, light sweet crude for July delivery, slumped $4.00 to $132.42 per barrel.
The contract had surged by $5 on Wednesday in response to a US government report that showed American crude reserves dipped for a fourth week running.
Brent North Sea crude for July delivery sank $2.72 to $132.30.
The greenback jumped on Thursday against rival currencies after news that US retail sales surged a stronger-than-expected 1.0 per cent in May as Americans splurged out on gasoline, consumer goods and restaurant meals.
A stronger dollar tends to dampen demand for crude because it becomes more expensive for foreign buyers.
“Oil futures are lower as the dollar strengthened,” said Sucden analyst Nimit Khamar in London.
He added: “Oil markets have been increasingly influenced by the dollar over the past year, as market participants have been using dollar-denominated commodities as a hedge against inflation and their dollar exposure.”
The New York oil contract had rocketed by $5.07 to a close of $136.38 on Wednesday after publication of the US inventory report.
“It could be a volatile time,” said David Moore, a commodities strategist at the Commonwealth Bank of Australia, commenting on the reversal of prices on Thursday.
“You've got to wonder, did it overshoot a bit? Or is there more to come?”
New York crude had struck a historic high $139.12 last Friday, when it won a record-breaking $10.75 in one day's trade. Brent crude had hit a historic peak of $138.12 last Friday.
Wednesday's surge in prices came after the US government said American crude stockpiles declined by 4.6 million barrels in the week ending June 6.
That was far heavier than market expectations for a drop of 1.5 million barrels and marked the fourth straight weekly fall.
Moore said prices were also supported by news of a planned June 22 meeting of the world's biggest oil producers and consumers to discuss skyrocketing crude prices.
The meeting, to take place in Jeddah, Saudi Arabia, will be at head-of-state level. British Prime Minister Gordon Brown confirmed his attendance on Thursday.—AFP
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