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Oil prices pull back as stock markets fall

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Oil prices tracked movements in stock markets, which pulled back following strong gains in early trade on optimism that Europe would soon come up with a credible plan to prevent the debt crisis from spreading across the euro zone.

Some reports suggested that the EU may soon boost its bailout fund to as much as €2 trillion to restore confidence that it has its debt problems under control.

However, the rally in European equity markets ended abruptly as investors quickly switched back to selling mode to take profits.

Futures for US crude contracts in New York responded by slipping back below the psychologically significant US$80 per barrel level surging in morning trade.

Oil prices tend to follow movements in share prices, which are seen as a barometer of the strength of the economy and energy demand.

Apart from the decline in stock markets in late afternoon, oil prices were hit by the double whammy of weak US manufacturing and home sales data.

The Chicago Fed national activity index, which was released in pre-market in the US, showed a contraction in manufacturing activity in the US in August, slipping from plus0.02 in July to minus-0.43.

Later in the day, the Commerce Department reported that new home sales dipped to six month lows at an annualised rate of 295,000 in August, down 2.3 percent from the previous month.

US light, sweet crude for November delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), fell 39 cents to US$79.46/barrel in New York this morning.

November Brent crude dropped 38 cents to US$103.58/barrel on London’s ICE Exchange this afternoon.

Today’s top risers in the oil and gas sector were:

Nostra Terra Oil & Gas (LON:NTOG)
, up 22.5 percent at 0.6 pence at midday

Heritage Oil (LON:HOIL)
, up 6.5 percent at 237.6 pence

Desire Petroleum (LON:DES)
, up 6.5 percent at 19.17 pence

President Petroleum (LON:PPC), up 6.5 percent at 32 pence

Urals Energy (LON:UEN)
, up 6.5 percent at 7.7 pence

The top fallers were:

Woburn Energy (LON:WBN), down 13.5 percent at 1.3 pence at midday

Roxi Petroleum (LON:RXP)
, down 8.5 percent at 2.75 pence

3Legs Resources (LON:3LEG)
, down 7 percent at 210.67 pence

Matra Petroleum (LON:MTA)
, down 6.5 percent at 1.08 pence

Petro Matad (LON:MATD), down 6 percent at 40 pence

Quick facts: Brent Crude Oil

Price: - -

LSE:BRENT
Market: LSE
Market Cap: -
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