Oil prices dive further

An oil rig is shown in this file photo.

An oil rig is shown in this file photo.

Published Feb 21, 2013

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London - Global oil prices slid on Thursday as traders worried over a potential end to US economic stimulus measures and awaited the latest snapshot of American crude inventories, analysts said.

Brent North Sea crude for delivery in April fell $1.36 to $114.24 a barrel in London early afternoon deals.

New York's main contract, light sweet crude for April shed $1.34 to $93.88 a barrel.

Minutes from the Federal Reserve's most recent policy board meeting showed some members were in favour of cutting short the $85 billion-a-month bond-buying introduced last year to support the world's biggest economy and top crude consumer.

The news, combined with speculation over a massive sell-off by an unnamed investment fund, had sent crude futures plunging by about $2 on Wednesday.

“Oil prices fell by $2 per barrel yesterday, and are continuing their downward spiral,” Commerzbank analyst Carsten Fritsch said on Thursday.

“The sell-off continued after the minutes of the most recent Fed meeting were published ... signalling a possible premature end to bond purchases, a key driver of oil prices in recent years.”

The Fed introduced a third round of its asset-purchase scheme, known as quantitative easing 3 (QE3), in September and said it would not take its foot off the pedal until unemployment had fallen and the economy was strong enough.

However, the minutes showed that a “number” of members of the Federal Open Market Committee said an ongoing evaluation of the easing “might well lead the committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labour market had occurred.”

Later on Thursday, the US government's Department of Energy (DoE) will publish its weekly report on oil inventories. The data is due one day later than normal owing to a public holiday on Monday.

Crude futures were also pulled lower on Wednesday by speculation that major oil producer Saudi Arabia was mulling plans to lift production to meet strong demand from Asian powerhouse China, analysts said.

The market also slid on news that global powers were ready to make key oil producer Iran an offer over their long-running dispute with Tehran.

World powers will make Iran an offer with “significant new elements” in a bid to resolve the dispute over its nuclear programme at talks next week in Kazakhstan, a western diplomat said Wednesday.

The next round of talks with Iran under the '5+1' format - UN Security Council members Britain, China, France, Russia and the United States, plus Germany - will be held on February 26 in Almaty after a long gap.

“We will take an offer with us which we believe to be a serious and substantial offer,” the western diplomat told reporters in London, on condition of anonymity.

“This is an offer which we think has significant new elements in it,” the diplomat added, but refused to give any specifics details.

Iran insists its programme of uranium enrichment is for purely peaceful purposes, but Western nations contend that Tehran wants to manufacture nuclear weapons. - Sapa-AFP

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