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Oil prices post weekly losses on euro zone concerns, US data

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Oil prices fell this week as fears that the European debt crisis is spiralling out of control and lacklustre US data outweighed concerns about the possibility of a European ban on oil imports from Iran and a drop in US inventories.

France this week called on the EU to impose further sanctions against Iran, including an oil embargo, after a report from the International Atomic Energy Agency (IAEA) said the country may be developing a nuclear weapon.

Iran, one of the most influential members of the Organization of petroleum Exporting Countries (OPEC), is currently the world’s fifth largest exporter of crude oil and has the world’s third largest oil reserves.

Apart from the possibility of Iranian oil supplies being taken off the market, crude futures were supported by this week’s US inventories data.

The US Department of Energy said on Wednesday that oil stockpiles shed a massive 6.2 million barrels last week, suggesting that energy demand in the US was on the rise.

However, this was not enough to push crude prices higher as demand for oil and other riskier assets was hit by Europe’s escalating debt crisis.

Friday’s debt auction held by Italy saw yields on its six month noted jump from 3.5 percent at the previous auction to 6.5 percent, while yields on its two year bonds rallied to a euro era high of 7.83 percent.

Likewise, an auction held by Germany earlier in the week was disappointing as the euro zone’s largest economy offered €6 billion in ten year bonds, it received demand for only €3.9 billion, causing yields on its benchmark ten year bonds rise above two percent.

Oil prices faced more pressure from this week’s downward revision of the this quarter US GDP growth estimate by the Commerce Department from 2.5 percent to two percent.

US light, sweet crude for January delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), ended the week at US$96.77/barrel.

January Brent crude closed at US$106.64/barrel on the ICE Exchange on Friday.

Major oil and gas companies were in decline this week.

Royal Dutch Shell (LON:RDSB) slipped from 2,294 pence to 2,171 pence over the past five days of trading, while fellow supermajor BP (LON:BP.) retreated from 449.95 pence to 425.4 pence.

Cairn Energy (LON:CNE) fell from 289.3 pence to 264 pence, BG Group (LON:BG.) eased from 1,320 pence to 1,245 pence and Tullow Oil (LON:TLW) dropped from 1,311 pence to 1,252 pence.

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