Oil prices mixed in Asian trade on US subprime credit woes

SINGAPORE (AFP) - Oil prices were mixed in Asian trade Friday, with the market taking a hit from the escalating contagion sparked by troubles in the US subprime credit sector, dealers said.

There are concerns that the financial impact of US lending to borrowers with poor credit records would lead to slower economic growth in the United States and elsewhere which would dampen demand for oil, they said.

At 11:55 am (0355 GMT), New York's main contract, light sweet crude for September delivery, was down one cent to 71.58 US dollars a barrel from 71.59 dollars in late US trades Thursday.

Brent North Sea crude for September added seven cents to 70.28 dollars.

"There are concerns about the impact of the US credit woes on economic activity and hence oil demand," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

"Some investors have also moved their money out of oil to cover losses in other sectors."

The problems in the high-risk subprime home loan sector has been sending shockwaves through the markets worldwide.

In the latest development, BNP Paribas Investment Partners, a unit of French bank BNP Paribas, said it had suspended three of its funds exposed to the subprime market, triggering heavy selling in equities globally.

Oil prices have fallen sharply after hitting a fresh all-time high of 78.77 dollar on August 1.

"After establishing the new record high last week, the market was really vulnerable to a reversal," Shum said.

"All the market needed was a trigger and the market found at trigger in the concerns over the US subprime market."

He said however there appeared to be strong support for prices at 70 dollars, with falling US energy inventories and a refusal by the OPEC cartel to raise output expected to help keep prices buoyant.

US crude inventories fell 4.1 million barrels to 340.4 million barrels for the week ended August 3, against the consensus forecast for 2.75 million barrels.

US gasoline stocks dropped a surprising 1.7 million barrels against expectations for a rise of 775,000 barrels.

Shum said that with the US hurricane season around the corner, "weather remains a wild card" as storms could threaten US oil production facilities in the Gulf of Mexico.