- The Washington Times - Thursday, June 8, 2006

1:45 p.m.

Oil prices sank for the third straight trading session this morning, falling by more than $1 a barrel following the death of al Qaeda leader Abu Musab al-Zarqawi in Iraq and on concerns about global economic growth.

Word by Nigerian militants that they would release foreign hostages and an easing of world tensions over Iran contributed to the decline in oil prices, which dipped by 2 percent yesterday after U.S. data showed rising crude and gasoline supplies.

“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, energy analyst with Purvin & Gertz in Singapore.

However, other analysts cautioned against reading too much into the U.S. air strike that killed al Zarqawi, a Jordanian-born militant who led a campaign of suicide bombings, kidnappings and other violence across Iraq. Societe Generale’s Mike Guido said killing Zarqawi “is an important hit; however, it seems to be more of symbolic accomplishment in the bigger picture.”

Mr. Guido said “growing concerns of a macro slowdown” in global economic growth — fueled today by the European Central Bank’s decision to raise its key interest rate — also were behind falling oil prices.

Light sweet crude for July delivery on the New York Mercantile Exchange fell $1.42 to $69.40 a barrel. The last time Nymex oil futures settled below $70 was May 24. Nymex gasoline futures fell by almost 7 cents to $2.055 a gallon.

July Brent crude futures on London’s ICE Futures exchange fell 77 cents to $68.42 a barrel.

Today’s slide in oil prices continued a two-day trend as the market adjusted to U.S. government data showing higher crude oil and gas inventories and some easing of tensions over Iran’s nuclear program.

Iran has said it will study a package of incentives by world powers hoping to curb its nuclear program.

For Nigeria, Vienna’s PVM Oil Associates noted that “following months of attacks and kidnappings some 611,000 barrels a day of Nigerian crude remains shut in.” Still, tension there also ebbed today, with militants in the oil-rich delta region saying they would release five kidnapped South Korean oil workers.

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