Oil prices ease further after sharp falls

May 30, 2008

, SINGAPORE, May 30 – World oil prices eased slightly in Asian trade on Friday after sharp earlier falls triggered by concerns about falling demand in the United States and other developed countries, analysts said.

New York\’s main oil futures contract, light sweet crude for July delivery, was 49 cents lower at 126.13 dollars per barrel after losing a hefty 4.41 dollars to close at 126.62 dollars in New York trading Thursday.

Brent North Sea crude for July delivery was 24 cents lower at 126.65 dollars per barrel following a slide of 4.04 dollars to 126.89 dollars on Thursday in London.

The slide in prices came after both contracts struck historic peaks a week ago. Brent hit 135.14 dollars and New York prices reached 135.09 dollars on tight supply fears.

"I guess the market\’s sort of factoring in the growing understanding that demand in the US is just not gonna recover," said Jason Feer of energy market analysts Argus Media Ltd. in Singapore.

Prices initially jumped higher Thursday after a weekly report on United States energy stockpiles. Values then tumbled as some analysts questioned if energy demand was dropping amid sky-high prices.

In its report, the US Department of Energy (DoE) said American crude reserves slumped 8.8 million barrels in the week ending May 23.

Feer said analysts concluded there had been a problem unloading stocks of crude because of fog at US terminals, and in fact there is a lot of oil "sitting in tankers offshore."

Gasoline or petrol stockpiles tumbled 3.2 million barrels, the DoE said. Market expectations had been for no change.

The DoE report was published one day later than usual due to a public holiday in the United States on Monday.

Despite decreasing demand in the West, Feer said prices remain supported by continuing strong demand from China, India and the Middle East.

French Economy Minister Christine Lagarde has written to her counterparts in the top industrial powers urging the Group of Eight countries to call on oil producers to hike production, her office said Thursday.

"We should urgently reiterate our call on oil producing countries to increase their production levels in order to alleviate tensions in the oil market and better anchor expectations," she wrote in the letter, the text of which was released by her office.

The Organisation of the Petroleum Exporting Countries (OPEC), which pumps 40 percent of the world\’s oil, has proven reluctant to bend to US-led demands for it to produce more crude to help cool prices.

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