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Business News/ Money / Brent drops below $112 after Japan nuclear plant blasts
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Brent drops below $112 after Japan nuclear plant blasts

Brent drops below $112 after Japan nuclear plant blasts

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Singapore: Brent crude fell by as much as 1.9% to below $112 after explosions rocked an earthquake-stricken Japanese nuclear plant on Tuesday, sending radiation levels higher and dampening sentiment across financial markets.

April Brent fell $1.77 to $111.90 a barrel at 9:02am, after trading as low as $111.49. Prices on Monday touched a two-week low of $111.16, down more than 7 percent from a 2-1/2 year high of $119.79 on 24 February US crude for April dropped $1.79 to $99.40.

“People are going for risk aversion, so investors are liquidating assets and positions including in crude oil and gold," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.

Japan’s prime minister warned that radioactive levels had become “significantly" higher around an earthquake-stricken nuclear power plant after explosions at two reactors, and the French embassy said a low level radioactive wind could reach Tokyo in 10 hours.

“This is just the first reaction after Fukushima, so it’s more about sentiment. The nuclear plant issue is an unexpected, very serious additional factor for the market because we don’t have any experience on that," Emori said.

Oil markets were also eyeing developments in the Middle East, where Saudi Arabia sent troops into Bahrain on Monday to help calm weeks of protests by the Shi’ite Muslim majority, a move opponents of the Sunni ruling family on the island state called a declaration of war.

Unrest has simmered across the Middle East for two months after popular uprisings toppled the leaders of Tunisia and Egypt, while Libya entered a civil war that has cut oil output by at least two-thirds of normal levels.

The protests in top oil exporter Saudi Arabia have been very small, but in neighboring Bahrain the Sunni monarchy is facing rising discontent from the Shi’ite Muslim majority.

Analysts saw the troop movement into Bahrain, home to the US Navy’s Fifth Fleet, as a mark of concern in Saudi Arabia that concessions by the country’s monarchy could inspire the conservative Sunni-ruled kingdom’s own Shi’ite minority.

“What’s happening in the Middle East is quite important to support the market, but sentiment is affected by what will happen in Japan first and this factor is much bigger in the market," Emori said.

Japan’s benchmark Nikkei average fell 12.17% to 8,449.73 on Tuesday, while the broader Topix shed 12.44% to 741.57.

In Libya, Moammar Gadhafi’s jets bombed rebels on Monday in a counter-offensive that has pushed them back 160 km in a week, far outpacing diplomatic efforts to impose a no-fly zone to help the insurgents.

On the data front, markets were looking towards weekly US inventory numbers from the industry group American Petroleum Institute later in the day and from the Energy Information Administration on Wednesday.

US crude oil stockpiles rose last week on higher imports and as refinery utilization edged lower as seasonal maintenance continued, a preliminary Reuters poll ahead of the weekly inventory data showed.

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Published: 15 Mar 2011, 10:55 AM IST
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