Oil drops below $70 on Europe debt woes
Singapore, June 7, 2010
Oil fell to below $70 for the first time in almost two weeks on Monday after disappointing US jobs data and warnings about Hungary's economy re-ignited concern about energy demand growth and Europe's debt crisis.
The euro fell to a four-year low as investors fled to the dollar, shedding riskier equities and commodities and sending Japan's Nikkei average down more than 4 percent to track declines of more than 3 percent for Wall Street on Friday.
US crude for July tumbled as much as $2 to $69.51, the lowest since May 26, and was down $1.52 at $69.99 by 0325 GMT, extending Friday's drop of more than $3. ICE Brent crude for July slid $1.01 to $71.08.
'There are lingering concerns about the European fiscal problems and also of course the weak US jobs numbers on Friday also added to the gloom,' said Toby Hassall, chief commodities analyst at CWA Global Markets Pty Ltd in Sydney.
'In addition to that, the strengthening US dollar is also adding pressure as well. It's a multitude of negative influences out there that are currently pressuring oil prices.'
A stronger dollar renders oil imports more expensive for European buyers and for consumers in Asia where demand is surging. The US dollar index rose more than 0.3 percent against a basket of currencies.
Hungary's government sought to draw a line under 'exaggerated' talk of a possible Greek-style debt crisis and said on Saturday it aimed to meet this year's budget deficit target.
Despite attempts to calm markets, Hungary's debt woes have rekindled fears that more Eastern European nations could reveal financial frailties.
US jobs data on Friday dented investors' hopes for a smooth economic recovery in the world's largest energy consumer.
The data showed nonfarm payrolls rose by about 431,000 jobs on a surge of temporary hirings for the US Census, but private employment, which measures the labor market's strength, rose 41,000, a number that analysts said was disappointing.
Stocks and oil prices could face further pressure this week unless investors get some relief from worries about Europe, jobs and the toll they might take on the economic recovery.
Among the week's major economic indicators are US retail sales and consumer sentiment, both of which should offer clues on the outlook for spending. Also on tap will be international trade data.
Still, analysts said the start of the Atlantic hurricane season this week -- which the top US government weather agency has warned could be the most intense since 2005 -- would provide some support to energy prices.
'Once the nerves calm down, and fundamentals re-assert themselves, we would expect prices to move higher quickly,' analysts at Barclays Capital said in a report, citing improving oil demand in Japan and the US. – Reuters