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SINGAPORE: Oil prices fell in Asian trade Wednesday
despite a surprise cut in key interest rates by the US Federal
Reserve amid deepening worries of a likely US recession, dealers
said.
In afternoon trade, New York’s
main contract, light sweet crude for delivery in March, was down 51
cents to $88.70 a barrel after gaining eight cents earlier.
The February contract, which
expired Tuesday, had closed 72 cents lower at $89.85 in New York.
Brent North Sea crude for March
delivery continued lower, dropping 50 cents to $87.95 a barrel. The
contract was down by a cent in morning trade.
In an unexpected move Tuesday,
the Federal Reserve slashed its key interest rate by an
unprecedented 75 basis points to 3.50 percent in an effort to offset
a housing downturn and credit crisis that threaten US economic
growth.
The Fed acted after Monday’s
massive plunge on stock markets around the world as US recession
fears deepened.
But analysts said the Fed’s
move had not reassured the oil market.
“I think everyone agrees that
the interest rate cut was the right direction for the US government
to take to help ease the fall in the equities market but it seems
that news has not gone through to commodities speculators,” said
Tony Nunan, of Mitsubishi Corp.’s international petroleum business
in Tokyo.
“The fear of a recession is
still there,” he said, and investors still believe the interest
rate cut is not strong enough to ward off recession.
Traders worry that a slowdown in
the world’s biggest economy would reduce demand for oil.
Analysts warned that oil prices
remained under pressure because of growing fears that the emergency
Fed measure could mean that US economic problems are far more
deep-rooted than previously thought.
“If the US goes into recession
the world will feel it, and there is no way oil can hang onto these
lofty levels,” Alaron trading analyst Phil Flynn said earlier.
“The price of oil can come down
dramatically and have one of the most significant corrections in
years.”
The market is also awaiting a
February 1 meeting of the Organization of the Petroleum Exporting
Countries (OPEC) in Vienna.
Leading energy consultants CGES
had warned that global growth could be further endangered if OPEC
decides to cut output.
Prices remain at high levels but
have shed more than 10 percent in value since striking a record in
New York of $100.09 a barrel in early January.
--AFP
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