NEW YORK (Reuters) - Oil dropped by $5 on Thursday, extending a decline of about 12 percent from last week’s record on worries over U.S. 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.
U.S. 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 U.S. government report on Wednesday showed that U.S. 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 U.S. 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 SU.TO 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.
Addition reporting by Santosh Menon in London, Luke Pachymuthu in Singapore and Gene Ramos in New York; Editing by David Gregorio
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