Oil Price Drops As Speculators Jump

Euphoria surrounding the soaring price per barrel of oil soured a bit last week, as world oil markets took a nosedive as speculators apparently decided the rally which doubled prices since March had gone far enough. London benchmark Brent blend futures dipped $0.61 cents to $20.02 a barrel in late trading after overnight U.S. data indicated slower than expected demand growth for gasoline in the world's biggest oil consuming nation. Weekly government data showed U.S. gasoline inventories rose in the week to August 20 when dealers were expecting a large decline. "Gasoline supplies appear plentiful," said Prudential Bache broker Nauman Barakat. Traders said the investment hedge funds which have led this year's price rise, in the wake of OPEC supply cuts, sold heavily on Thursday. "We've seen a lot of fund liquidation," said Barakat of oil trading on the New York Mercantile Exchange. Brent prices peaked at $21.27 a barrel last week and speculators' oil futures holdings in New York were running near record levels. Dealers have closely monitored a decline in petroleum stockpiles in the major industrialized nations of the West since exporting nations agreed supply curbs last March. Stockpiles now are lower than last summer's bloated peak but still have some way to recede before shrinking to the standard levels of 1996 and 1997. News last Tuesday that the German government planned to sell some of its strategic stockpile helped spur the sell-off. Germany's Economic Ministry said it would release 4.5 million tons of crude over the next year. Nevertheless, analysts said that would prove a drop in the ocean compared to the large deficit of supply they were still expecting during the northern hemisphere months if oil exporters retain supply cuts. OPEC oil ministers from Saudi Arabia and Venezuela are expected to discuss strategy with non-OPEC Mexico during meetings at the end of the week.