Oil prices fall after IEA move

Oil prices have tumbled after a shock move by the International Energy Agency to open its emergency reserves.

Oil prices fall after IEA move

Oil prices have tumbled after a shock move by the International Energy Agency to open its emergency reserves.

The price of North Sea Brent crude fell by more than 5% to £107 a barrel with light crude falling to $90 per barrel after the IEA said it would release $60m barrels of oil to make up for the loss of Libyan exports.

Half of the oil will come from the US's strategic petroleum reserve, while the UK is contributing around three million barrels.

The IEA said the move was about helping ease a real oil shortage not prices, but it comes just weeks after the OPEC cartel failed to agree an increase in production to help ease the rising oil price.

The development added to pressure on commodity stocks in London as the FTSE 100 Index fell by around 100 points to a new three month low of 5666.

Investors' appetite for riskier assets was also hit by a loss of confidence in the global economic recovery after the US Federal Reserve yesterday gave a gloomy forecast for the world's biggest economy.

Mining shares, which feature heavily in the FTSE 100 Index, dropped by as much as 7% today as commodity prices followed oil downwards.

Federal Reserve chairman Ben Bernanke last night said the problems plaguing the US economy "may be stronger and more persistent than we thought" and it downgraded its growth forecast for this year.

It now expects the economy to grow between 2.7% and 2.9% this year, whereas it had expected growth of between 3.1% and 3.3%, while it said inflation will remain high.

The bearish comments from the Fed have combined with fears over the ongoing debt crisis in Greece.

The US dollar strengthened against major currencies as the economic uncertainty, fuelled by a weaker than expected figure on US benefit claims, caused nervy investors to seek safer places for their assets.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: "Currently the appetite for risk is extremely light and another round of uncertainty for global economic prospects has driven sentiment lower, with money flowing again to traditional safe havens at the expense of equities."

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