Crude oil prices fall below $70 per barrel

Brad Foss

Associated Press Writer

Oil prices sank by more than $1 a barrel to below $70 a barrel on June 8 following the death of al-Qaida’s leader in Iraq and on concerns of a slowdown in global economic growth, among other factors.

From an oil-market perspective, analysts cautioned against reading too much into the U.S. air strike that killed Abu Musab al-Zarqawi, a Jordanian-born militant who led a campaign of suicide bombings, kidnappings and other violence across Iraq.

Al-Zarqawi was not directly linked to attacks on Iraqi oil infrastructure, said Antoine Halff, director of global energy at Fimat USA in New York. “As such, I don’t think his death will result in a significant decline in attacks on pipelines,” he said. “Attacks on pipelines are by former Baath party insiders.”

Word by Nigerian militants that they would release foreign hostages and an easing of world tensions over Iran contributed to June 8’s 2 percent decline in oil prices, which dipped by a similar amount June 7 after U.S. data showed rising crude and gasoline supplies.

Yet even after three straight days of falling prices, the cost of crude is still about 30 percent more than a year ago, and that is a big reason why nationwide pump prices are hovering slightly below $3 a gallon, on average, and not likely to plummet anytime soon.

Analysts said gasoline traders are especially worried about this summer’s Atlantic hurricane season and the potential for powerful storms to damage important oil production and refining facilities across the Gulf Coast.

Light sweet crude for July delivery fell $1.47 at $69.35 a barrel on the New York Mercantile Exchange. The last time Nymex oil futures settled below $70 was on May 24. Nymex gasoline futures fell by almost 7 cents to $2.055 a gallon.

In London, July Brent crude futures on the ICE Futures exchange fell 77 cents to $68.42 a barrel.

“The hope is that with the removal of the terror leader in Iraq, the Iraqi situation will stabilize faster and future oil supply could increase,” said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz.

But Societe Generale’s Mike Guido said killing al-Zarqawi “seems to be more of symbolic accomplishment” and that “growing concerns of a macro slowdown” in global economic growth — fueled June 8 by the European Central Bank’s decision to raise its key interest rate — also played an important role in sending oil prices lower.

Another recent balm for the market was word from Iran that it would study a package of incentives by world powers hoping to curb its nuclear program.