Oil plunges below $64 on fears recovery may lag
Oil prices plunged nearly $3 to below $64 a barrel Monday as dismal unemployment figures from the U.S. and Europe last week sparked investor doubts about any nascent economic recovery.
A significant fall in natural gas prices — a likely sign that industries are still struggling and unlikely to add jobs — as well as gains by the U.S. dollar and falling stock markets around the world all helped push energy prices lower.
By mid-afternoon in Europe, benchmark crude for August delivery was down $2.93 to $63.80 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, the contract fell as low as $63.40. It last settled on Thursday at $66.73.
Trading was closed in the U.S. on Friday for the Independence Day holiday.
Oil has tumbled from an eight-month high above $73 a barrel last week after gloomy U.S. consumer confidence and jobs numbers fueled doubts about a rally that has doubled the price of crude since March.
“It’s not looking too pretty in terms of economic data,” said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. “The demand side fear is coming back into play.”
A Labor Department report last week showed the U.S. economy lost a larger-than-expected 467,000 jobs in June. The unemployment rate climbed to 9.5 percent, a 26-year high. Unemployment in the 16 countries that use the euro spiked to a 10-year high in May, also at 9.5 percent.
“More and more people are becoming convinced we won’t see a full-blown recovery any time soon,” Moltke-Leth said. He said he expects the oil price to soon test the $60 a barrel level.
“With economic news still gloomy, oil demand sluggish, stocks plentiful and no supply side disruption in sight, we could be on the verge of a short term downward price correction,” said KBC Market Services in London.
The dollar’s rise against other major currencies also weighed on oil prices, as investors who seek out commodities as a hedge against dollar weakness and inflation returned to the U.S. currency.
The euro was trading at $1.3915, down from $1.4001 late Friday in London, while the British pound fell to US$1.6164 from $1.6341.
Lending some support to prices was another attack on oil operations in Nigeria. Militants said on Sunday they attacked a Royal Dutch Shell oil facility in southern Nigeria, the latest sabotage in a campaign that has undermined output from Africa’s largest producer.
In other Nymex trading, gasoline for August delivery fell 5.14 cents to $1.7394 a gallon and heating oil slid 6.21 cents to $1.6395. Natural gas for August delivery plummeted 19.5 cents to $3.420 per 1,000 cubic feet.
In London, Brent prices dropped $1.51 to $64.10 a barrel on the ICE Futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.
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