Oil prices slide on prospects of weaker energy demand

LONDON (AFP) - World oil prices extended losses yesterday, falling below 70 dollars a barrel in London for the first time since June, on worries that energy demand may weaken amid US economic woes, analysts said.

Brent North Sea crude for September delivery fell to 69.30 dollars per barrel, the lowest level since June 13.

It later stood at 69.65 dollars per barrel, down 1.34 dollars.

New York's main futures contract, light sweet crude for delivery in September, shed 1.23 dollars to 70.92 dollars per barrel.

"Crude oil prices were lower, as concerns over the prospect of slower oil demand persist," Sucden analyst Michael Davies said.

Oil investors were weighing up whether the weak US subprime mortgage sector would lead to a drop in oil demand in the United States -- the world's biggest consumer of energy -- and even an economic fallout worldwide.

There are concerns that the problems in the high-risk, or subprime, segment of the mortage business could spill into the broader housing market and affect more banks and investment funds exposed to US property.

World oil prices had also ended lower on Wednesday, despite a larger-than-expected decline in US crude stocks last week.

The US Department of Energy reported in a weekly snapshot that crude inventories fell by 4.1 million barrels to 340.4 million barrels for the week ended August 3.

The inventory decline was much sharper than forecast. Most analysts were expecting stocks to have dropped by 2.75 million barrels.

A decline in US gasoline stocks also caught the market off guard as the government report revealed a surprise 1.7 million barrel decline in motor-fuel inventories. Analysts had forecast a rise of 775,000 barrels.

Oil prices have been volatile in the past week. Prices had moved higher on Tuesday a day after plunging by more than three dollars on concerns of weaker energy demand tied to fears about US economic growth.

A week ago, New York oil prices had rocketed to a record high of 78.77 dollars a barrel amid tight supplies.

Despite the heavy retreat since then, crude prices remain relatively high. Oil prices rose by more than 20 percent during June and July on concerns over rising geopolitical tensions, falling US crude stocks, growing US demand for motor fuel and expectations that crude demand would rise strongly this year, according to analysts.

These expectations were prompted in part by the International Energy Agency, which raised its 2007 oil demand forecasts.

The IEA has consistently called on OPEC to increase production but the oil cartel has said such a move would have no effect on prices.

The Organization of Petroleum Exporting Countries argues that the recent surge in oil prices is not linked to a lack of crude. The cartel's next meeting is planned for next month in Vienna, home to OPEC's headquarters.