Page last updated at 19:33 GMT, Thursday, 11 September 2008 20:33 UK

Volatile oil prices slide again

Petrol customer
Slowing global economic growth may curb global energy demand

Oil prices hit six-month lows near $98 a barrel on Thursday as the dollar rallied and demand for fuel decreased.

Prices had risen earlier as Hurricane Ike headed towards oil installations on the Texas coast forcing nearly 7% of US fuel production to be shut down.

Opec had also reduced output to curb falling prices.

Brent North Sea crude for delivery in October settled at $97.29 a barrel after hitting its lowest level since March at $96.99.

And New York's benchmark contract, light sweet crude for October, fell $1.71 cents to $100.87 a barrel after dipping as low as $100.10.

Demand focus

The dollar hit a one-year high against the euro and a number of other currencies on Thursday. The euro slid below $1.39 for the first time in a year on heightened concerns about a weak European economy.

The strong greenback makes goods such as oil - which are priced in dollars - more expensive for foreign buyers, dampening demand.

"Crude oil futures slipped further... as the market focused on demand concerns and the strengthening dollar," said Sucden analyst Michael Davies.

Oil prices reached record levels of above $147 in July, hit by worries that a US-led economic slowdown would curb global demand for energy.

Producer cartel Opec announced a surprise cut in output levels in Vienna on Wednesday, causing prices to rise initially.

But oil fell below $100 a barrel on renewed fears that the deteriorating health of the global economy could dent demand.

The International Energy Agency (IEA) also cut its estimate for global oil demand this year and next.

The IEA said consumers in industrial nations were changing their lifestyles in response to high prices.

Unusual step

The Hurricane season has disrupted energy firms along the Gulf of Mexico - which accounts for a quarter of US oil production and 15% of natural gas production.

The sector is still reeling from the impact of Hurricane Gustav more than a week ago, which shut more than 95% of oil production and more than 73% of natural gas output.

In preparation for Ike, four Gulf coast refineries have shut down operations, accounting for 6.7 percent of the nation's capacity.

Because of Hurricane Ike's expected impact on oil and gas supply to the US, the Chicago Mercantile Exchange has announced it will have a special trading session this Sunday - a day it is usually closed.

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