Drop in oil prices eases supply fears

OIL prices dropped further below $40 yesterday as increased supplies in the United States and OPEC’s pledge to bump up output eased immediate concerns of a supply crunch in world markets.

Oil dealers said the downside potential for prices would be limited by fears of security risks in the oil-rich Middle East and worries US gasoline stocks would be drained as the summer driving season picks up, despite the latest supply increase.

US light crude for July dropped 65 cents to $37.84 per barrel on Monday, more than 10% below a 21-year high of $42.45 traded last week.