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Oil prices firm after plunging

LONDON, Sept 23 – World oil prices rose on Friday as traders fished for bargains, after a drop the previous day on fears of a fresh global economic downturn which would slash global demand for energy.

New York’s main contract, West Texas Intermediate for delivery in November rose 35 cents to $80.86 a barrel, one day after losing more than five dollars.

Brent North Sea crude for November increased 65 cents to 106.14 in London midday trade.

Despite the slight gains, the market remains dogged by persistent worries over another potential recession in the United States and the deepening debt crisis in the eurozone.

The United States is the world’s biggest economy, and the biggest oil-consuming nation. It has yet to fully recover from the 2009 recession, which was the country’s worst since the Great Depression in the 1930s.

“Oil prices have been on a very gradual downward trend since April and have been brought down by the continuous poor economic reports, from the US, eurozone and China,” said Nick Campbell, an analyst at energy consultants Inenco.

“This week, the spotlight has been on the US Federal reserve and the G20 meeting to provide confidence to the market, and there were expectations of further monetary policy from the US and eurozone to boost economic growth.

“Unfortunately the announcements from both parties have had the opposite effect.”

New York crude had plunged sharply on Thursday, hit by a stronger dollar as investors flocked to the safe-haven currency on escalating fears about the weak economy and the threat of a new recession.

Investors ran for cover a day after the US central bank warned of significant downside risks to the economy — concerns that won further support on Thursday in the wake of poor Chinese manufacturing data.

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Fears for the world’s two biggest economies added to new tensions surrounding the eurozone debt crisis, causing investors to head for the dollar as cover and sending equities and commodity prices slumping..

A strong greenback makes dollar-priced crude more expensive to holders of other currencies, softening demand.

The US Federal Reserve on Wednesday unveiled a $400-billion stimulus plan to reduce long-term interest rates but investors chose to focus on its warning about the outlook for the world’s biggest economy and oil consumer.

The Fed painted a grim picture of the economy, strapped with slow growth, high unemployment and a depressed housing market.

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