31st May, 2012
Oil prices dived to fresh multi-month lows Thursday, driven by weak data in top global crude consumer the United States, and as the dollar rallied on worries of a possible Spanish bailout, dealers said.
In late afternoon trade, Brent North Sea crude for July slumped to $101.27 per barrel, which was the lowest level since October 5.
New York’s main contract, West Texas Intermediate crude for delivery in July, tumbled to $85.86 a barrel, which was last seen on October 24.
“Crude oil prices plunged on Thursday, tracking sharp losses in Wall Street, while a surprisingly large build in crude oil stocks showed serious concerns about the lack of the US oil demand,” said Sucden analyst Myrto Sokou.
“In addition, the fairly weak US economic data weighed further on market sentiment and limited risk appetite.”
Wall Street slid Thursday as fresh jobs and growth data painted a dull picture of momentum in the economy, while worries over Spain’s teetering bank Bankia clouded the markets.
The US government’s Department of Energy (DoE) announced that American crude inventories rallied by 2.2 million barrels in the week ending May 25.
That beat market expectations for a gain of just 100,000 barrels, according to analysts polled by Dow Jones Newswires, and indicated weaker-than-expected demand.
In more grim news, the US government cut its estimate for first-quarter economic growth to 1.9 percent from 2.2 percent, sparking questions over the strength of the recovery.
And two jobs reports — weekly unemployment claims and private-sector job creation in May — were both disappointing, pointing to slow overall growth over the past month.
“Today’s data from the United States was dire with a series of weak employment numbers and the lowest reading on the Chicago PMI since September 2009,” said GFT analyst David Morrison.
“Investors are getting increasingly nervous ahead of tomorrow’s non-farm payroll number.
“The global economic outlook has taken a turn for the worse and this suggests that demand for oil should slow sharply.”
The European Union meanwhile pressed Spain to urgently clear up doubts over its mammoth rescue of stricken lender Bankia so as to calm investors fearing a financial breakdown.
The euro dived to another 23-month low at $1.2337 on concerns over a potential rescue deal for debt-plagued Spain, dealers said.
The strong greenback makes dollar-priced oil more expensive for buyers using weaker currencies. In turn, that tends to hurt demand and dampen prices.
Crude futures tumbled in May on escalating fears that the eurozone debt crisis — which has already sunk Ireland, Greece and Portugal — could spread to other fiscally-challenged nations and slash energy demand.