BackOil slides $3 on economic gloom, dollar
Oil slides $3 on economic gloom, dollar
PremiumLondon: Oil prices fell over $3 a barrel on Thursday, with US futures touching $82.75 a barrel as a combination of signals heightened worries about global economic growth and a rallying US dollar added to downard momentum.
Investors were rattled by the US Federal Reserve’s statement that the world’s largest oil consumer faced significant downside risks, and analysts worried measures to kick-start growth would be insufficient.
Adding to gloom, a slowdown in China and the worst euro zone private sector growth in over two years cast clouds over the outlook for the global economy.
“Brent is heading towards a test of $107 a barrel," said Thorbj?rn Bak Jensen, an analyst at A/S Global Risk Management Ltd. “It’s a combination of no QE3, low economic growth, China’s PMI falling and European PMI data either slightly or widely below expectations."
US crude futures were down $2.70 a barrel at $83.22 a barrel at 2:24pm, while Brent futures were $2.23 lower at $108.13 a barrel.
Further downward pressure on Thursday was exerted by the US dollar, which hit a seven-month high against a basket of currencies as investors fled from risky assets.
CLOUDS GATHER
The euro zone’s private sector contracted this month for the first time in two years, underscored by German business activity figures dropping to a 26-month low.
With signs the crisis in Greece and other Mediterranean countries was spreading to others in Europe, and a far-from-reassuring prognosis issued by the Fed, fears were magnified by Chinese manufacturing sector data.
A survey showed factory activity in the world’s number two economy contracted for a third month, indicating China may fail to provide a counterweight to flagging US and European growth.
The disappointing round of economic data help send world stocks to a fresh one-year low and investors poured money into safer currencies.
“It is hard to ignore the macroeconomic picture. Oil seems to have fallen in line with equity markets," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
“Otherwise, the data on crude stocks was fairly bullish for oil. Prices shouldn’t have fallen so low, based on just oil fundamentals."
The round-up of disappointing surveys combined with the Fed’s statement accompanying “Operation Twist" wiped out bullish sentiment the previous day when weekly US Energy Information Administration data showed crude inventories fell to the lowest level since January.
The next major economic event markets will be watching is a G-20 meeting on Thursday and Friday that is expected to focus on Europe’s response to its debt crisis.
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