Oil prices fall heavily as Iran tensions ease
NEW YORK, July 7 (AFP) Jul 07, 2008
Oil prices fell sharply Monday in a move some traders attributed to an ease in geopolitical tensions related to Iran's nuclear program and a strengthening US dollar.
New York's main oil futures contract, light sweet crude for August delivery, slumped a hefty 3.92 dollars to close at 141.37 dollars. The contract had earlier fallen over five dollars before trimming some of its losses.
In London, Brent North Sea crude for August settled down 2.55 dollars at 141.87 dollars a barrel.
Prices retreated following an extended weekend break here Monday after the New York contract struck a record high of 145.85 dollars and after Brent struck an all-time peak of 146.69 dollars last Thursday.
New York floor trading was shuttered on Friday due to the Independence Day public holiday in the United States.
Prices cooled after Iran offered to negotiate on its nuclear drive over the weekend, but without a freeze on uranium enrichment, in its first comments since responding to an international package aimed at ending the standoff.
EU foreign policy chief Javier Solana said he hoped to meet later this month with Iran's top nuclear negotiator, after Tehran gave its response to a package of incentives aimed at halt its uranium enrichment.
"Following the news that Iran may be prepared to compromise on its nuclear development program, oil prices are a little softer," said analysts at the John Hall Associates energy consultancy in London.
"However, the region accounts for a sizeable portion of global (oil) production so until more definite news of a compromise is forthcoming then prices will continue to attract a premium."
Iran, the world's number four crude producer, is locked in a standoff with the West over its nuclear energy program. The country claims it is for generating electricity while some Western nations fear Tehran is developing nuclear weapons.
Six world powers are offering Iran technology and negotiations if it suspends uranium enrichment.
Traders said the stronger US dollar also depressed oil prices.
"The greenback was stronger, extending gains from the end of last week and helping to put more pressure on oil prices," said Sucden analyst Andrey Kryuchenkov .
A strengthening US currency makes dollar-priced crude more expensive for buyers using other currencies, and potential dampens demand among some market players.
The dollar rallied against major currencies after US President George W. Bush, speaking over the weekend ahead of a Group of Eight (G8) summit in Japan, said his administration backed a "strong" dollar.
Oil blazed a record-breaking trail last week, driven by geopolitical tensions over Iran, a weaker US dollar and tightening global supplies, traders said.
Sky-high oil prices -- which ramp up the cost of petrol, jet fuel, and domestic electricity and gas among other fuels -- have triggered fears about inflationary pressures and world economic growth.
Rising fuel costs, especially gasoline prices, have sparked protests around the world.
The G8 rich nations -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- opened a summit Monday aimed at battling rocketing oil and food prices that threaten to derail the global economy.
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