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Oil prices slump after IEA releases strategic supplies

Oil prices slump after IEA releases strategic supplies

Oil prices plummeted to four month lows at the end of the week after the International Energy Agency (IEA) decided to tap into its strategic reserves to release 60 million barrels into the markets over the next 30 days. Thursday’s shocking announcement from the Paris-based agency, whose prime mission is to ensure that the oil market is well supplied, triggered a sell-off in commodity markets and drew the ire from OPEC price hawks.

Crude oil contracts for August and September delivery shed over US$8 per barrel in New York on the back of the announcement from IEA, while Brent crude fell to nearly US$100 per barrel just two months after topping US$125.

IEA said it was responding to the shortfall in oil supplies caused by the civil war in Libya, which has taken the North African’s country entire production of 1.7 million barrels per day off the market.

Iran’s OPEC governor Mohammad Ali Khatibi denounced the move as “meddling in the natural oil market” and asserted that the decline in prices will not be sustained in the long term.

Oil prices edged higher on Friday with US crude futures returning above US$91/barrel despite renewed concerns over Europe’s debt problems.

On Friday, Moody’s put the ratings of 13 Italian banks under review for a possible downgrade. The rating agency added that another 16 banks in Italy could see their long term debt ratings slashed.

Traders fear that the debt crisis that has put Greece on the brink of bankruptcy may spread into other euro zone countries, triggering another financial meltdown and reducing energy demand.

US light, sweet crude
for August delivery, which is currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), ended the week at US$91.10/barrel.

August Brent crude closed at US$105.63/barrel on London’s ICE Exchange on Friday.

BP (LON:BP) rose from 433 pence to 437 pence during the week, while most other oil and gas companies fell over the past five days of trading. Fellow supermajor Royal Dutch Shell (LON:RDSB) fell from 2,128 pence to 2,116 pence.

Tullow Oil (LON:TLW) slipped from 1,264 pence to 1,216 pence, Cairn Energy (LON:CNE) dropped from 400 pence to 379 pence and BG Group (LON:BG) slumped from 1,322 pence to 1,275 pence.

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Brent Crude Oil Timeline

Newswire
November 23 2011

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