Oil dropped by $5, extending a decline of about 12 percent from
last week's record on worries over US demand and easing political
tensions between Iran and the West over the OPEC producer's nuclear
program.
Oil's slide marks the biggest three-day loss in the market in
percentage terms since December 2004, and the biggest three-day
loss in dollar terms since oil futures started trading in New York
in 1983.
The sell-off has been a boon to world stock markets that have
recovered some ground after getting hard-hit in recent months by
mounting fears over inflation and the health of the banking
sector.
US crude settled down $5.31 at $129.29 a barrel, the lowest since
early June, adding to more than $10 of losses over the previous two
days that have brought prices further from Friday's all-time peak
of $147.27 a barrel. London Brent crude fell $4.74 to settle at
$131.07 a barrel.
Despite the losses, oil prices remain up nearly 30 percent so far
this year, and more than sixfold since 2002, driven by surging
demand from developing economies in Asia and worries that world
production growth won't be able to keep pace.
Dealers said the bulk of the downward push on crude oil in recent
days has been concern that economic trouble in the United States
was cutting deeply into demand for fuel in the world's biggest
energy consumer.
"Consumers are being pinched between higher costs for
necessities and lower real wages. The end result is falling demand
almost across the board," said Peter Beutel, president of Cameron
Hanover.
A US government report on Wednesday showed that US oil product
demand over the past four weeks was running 2 percent below a year
ago, a sign soaring pump prices were hitting consumption.
Dealers added that apparent easing tensions between the United
States and Iran over the latter's nuclear program have reduced
geopolitical risk premium in the oil market.
The United States said on Wednesday it was sending an envoy to
Geneva to join nuclear talks with Iran for the first time, to
underline to the Islamic Republic and others that Washington wanted
a diplomatic solution to the impasse.
Iran's foreign minister said on Thursday US participation in the
nuclear talks was "positive."
Thursday's losses were limited by supply disruptions in Nigeria and
Canada that together pulled nearly 200,000 barrels per day off the
market -- the equivalent of a large oil field in the Gulf of
Mexico.
An attack on an oil pipeline in Nigeria, the world's eighth-biggest
oil exporter, led Italian oil company Eni to temporarily shut down
production of 47,000 bpd in Nigeria because of loss of pressure in
the lines.
In Canada, Suncor Energy Inc said a leak at a pipeline carrying
synthetic crude and diesel from its oil sands fields in Alberta
forced a halt of about 140,000 bpd of shipments.
