Oil prices decline by over 10%

10-Dec-07

Oil prices have slipped further on revelation of details by a November US jobs report that turned out to be less robust than expected. Light, sweet crude for January delivery fell to US$88.12 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. January Brent crude dipped to US$88.28 a barrel on the ICE Futures exchange in London. Crude oil futures have gone back by over 10% from their all-time highs of near-US$100 in November. This dip has been fuelledpartly by the belief that slower growth in USA- the world's largest economy will cut into demand growth for oil; and secondly- oil and petroleum product supplies are not perceived to be insufficient for the Northern Hemisphere's winter. The report Friday showed U.S. employers added 94,000 jobs to their payrolls in November, crushing hopes of some oil investors that the Federal Reserve will cut interest rates by a half percentage point instead of the more widely expected quarter-point when it meets Tuesday. The larger interest rate cut would add to the dollar's weakness against other currencies and provide stronger support to oil prices. Oil offers a hedge against a weak dollar and is more attractive to foreign investors when the dollar is falling.