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Oil prices slump

NEW YORK, Aug 18  – Oil prices slumped Monday, extending heavy pre-weekend losses and mirroring slumping stock markets, amid concerns that US economic recovery would take longer than expected.

New York\’s main futures contract, light sweet crude for delivery in September, fell 76 cents to 66.75 dollars a barrel.

At one stage, prices dived to 65.23 dollars a barrel.

On Friday, the New York contract lost 3.61 dollars, or more than four percent, as weak US consumer confidence data dampened hopes for a pickup in oil demand in the world\’s largest energy-consuming country.

In London on Monday, Brent North Sea crude for October delivery shed 90 cents to 70.54 dollars per barrel.

"There are concerns once again that the economic recovery is going take longer than expected," said Deutsche Bank energy economist Adam Sieminski.

"There is not going to be oil demand without growth … There is not enough demand, and plenty of inventories."

Antoine Halff of Newedge Group said expectations of a rapid and pronounced rebound in consumption were being challenged.

The market ignored a rebound Monday in a key US manufacturing survey.

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The Federal Reserve Bank of New York said the Empire State Manufacturing Survey\’s general business conditions index increased 13 points, to 12.1, its highest level since November 2007.

"Still, the pall of skepticism, along with a rally in the dollar, should combine to keep oil prices under pressure in the very short term," said Mike Fitzpatrick of MF Global.

"This does not mean that we are predicting a \’double dip\’ recession or that prices will fall to lows of earlier this year, but it is clear that markets have run ahead of conditions, which should not take too long to correct.

"There should be significant support near 65 dollars," Fitzpatrick said.

The bearish tone in the oil market Monday reflected the equity market gloom across the globe despite news that Japan has emerged from recession.

Up to last week, oil prices had jumped by about a fifth over one month on increased hopes of economic recovery and soaring Chinese crude imports.

However, energy consultancy CGES on Monday noted that China\’s oil imports were starting to flag after hitting a record 4.635 million barrels per day in July.

CGES noted that "the boom in Chinese commodity imports appears to have run out of steam … with the rise in (oil) prices and a drying up of cheap loans."

China is the world\’s second-biggest energy consumer, after the United States.

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Also on Monday, traders kept one eye on stormy weather close to US energy installations, which may result in oil supply disruptions.

The first hurricane of the Atlantic storm season, Bill, strengthened Monday as it churned toward the US mainland, while another sizeable storm, Claudette, lost punch at landfall, weather officials said.

In July last year, oil prices hit record peaks above 147 dollars a barrel on worries about potential supply disruptions.

The market then collapsed because of weak energy demand arising from the world financial crisis, striking 32 dollars in December.
 

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