Oil prices fall in Asia on US growth concerns - UPDATE

Mon, Mar 24 2008, 07:05 GMT
http://www.afxnews.com

SINGAPORE (Thomson Financial) - World oil prices fell by more than a dollar in Asian trade Monday amid fresh concerns that energy demand would be affected by the slowing US economy.

Concerns over the US economy, the biggest oil consumer, resurfaced after the OECD reduced its economic growth forecasts for the first half of this year and said the world's largest economy was teetering on the brink of recession.

In afternoon trade, New York's main oil futures contract, light sweet crude for delivery in May, tumbled 1.61 dollars to 100.23 dollars per barrel.

The contract closed at 101.84 on Thursday, at one time sinking to below the 100-dollar level. Markets were closed Friday for a public holiday.

London's Brent North Sea crude for May delivery fell 1.31 dollars to 99.07, after settling at 100.38 on Thursday.

"The 100-dollar mark is going to be a support level and prices may congest around that level" as the market focuses on the weakening US demand, said Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo.

"People are afraid that Bear Stearns is not the only bank in trouble. There is a lot of talk that there could be bigger problems hidden in the US economy," said Nunan.

Bear Stearns, formerly among the biggest financial giants, was ravaged by the US subprime mortgage crisis and agreed to sell out to JP Morgan Chase for a paltry 236 million dollars after rival banks stopped trading with it.

The Paris-based Organization for Economic Cooperation and Development (OECD) said the US economy is now expected to grow 0.1 percent in the first quarter, down from the 0.3 percent estimated in December, and would display zero growth in the second, compared with 0.4 percent given previously.

A growing number of US economists believe the world's biggest oil importer is already in a recession.

OECD analysts believe US growth will falter in part due to the ongoing housing downturn, which they said would likely dampen home prices "for some time to come."

New York oil prices scaled a record high of 111.80 dollars last week as the dollar dived against the euro and as investors sought a safe refuge for their cash instead of the volatile equity markets.

The weak US currency encourages demand for dollar-priced commodities, which become cheaper for buyers using stronger currencies.