SINGAPORE (AFP) — World oil prices fell by more than a dollar in Asian trade Wednesday, with more volatility expected as investors cast a wary eye on the global financial markets, dealers said.
In afternoon trade, New York's main contract, light sweet crude for April delivery, dropped 1.12 dollars to 108.30 dollars a barrel, down from 109.42 Tuesday at the close of US trades.
London's Brent North Sea crude for May delivery fell 1.11 dollars to 104.45.
The two benchmark contracts ran to record peaks Monday before closing lower as traders fretted that the fallout from rising financial market turmoil would curb energy demand.
"There is a lot of volatility in oil trading and so far this week, we have seen the oil market on a see-saw," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
"There is a tug of war from the pull of the financial markets and pull from the fundamentals, which are weakening, so this tug of war is likely to continue in the coming weeks," he said.
Based on fundamentals, current prices are not sustainable because energy demand typically slows at this time of year after the northern hemisphere winter peak period, dealers said.
"We are entering into the second quarter, where spring demand is typically weaker," said Shum. "For the most part, fundamentals are weakening."
Shum said the recent turmoil in the global financial markets had triggered a flood of funds into commodities, including oil, as investors seek a safe haven.
The weak US currency, which slumped to a record low of 1.5905 against the euro on Monday, has been another factor behind crude's recent rise.
A weaker greenback makes crude futures an attractive investment option because it is priced in dollars, like other commodities, and becomes more affordable for purchasers holding stronger currencies.
Investors also view oil futures as a hedge against inflation.
The US Deparment of Energy's weekly petroleum reserves report due out later Wednesday is expected to show a rise of 2.3 million barrels in the country's crude stockpiles, dealers said.
"As maintenance season grinds on and limits crude throughputs, seasonal stock-building will continue," said Linda Rafield, a senior oil analyst and editor of Platts Futures and Derivatives Review.
Copyright © 2009 AFP. All rights reserved. More »
