oil prices continue to fall

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Brent oil prices sank under $100 a barrel on Friday for the first time in eight months, hit by weak Chinese data and eurozone debt tensions centred on Spain, and ahead of more key US data.

Brent North Sea crude for delivery in July tumbled to $99.60 a barrel in early London deals, which was the lowest level since October 4, 2011.

New York’s main contract, West Texas Intermediate crude for July dived to $84.52 a barrel — the lowest level since October 20.

“Oil prices have dipped below the psychological $100-per-barrel with the focus turning away from the Iran situation and onto the state of the global economy after a raft of poor economic results over recent days,” said Gary Hornby, an analyst at energy consultants Inenco.

“Concerns over Spain have resurfaced after the country’s 10-year bond yields nudged close to 7.0 percent, a level seen as unsustainable and continuing uncertainty over the upcoming Greek elections in mid-June.”

Adding to the sense of panic, latest figures showed a net 97 billion euros ($121 billion) of investor money fled Spain in the first three months of the year — the highest on record.

China meanwhile revealed Friday that its manufacturing activity grew at a much slower rate than expected in May, further confirming the world’s number two economy is slowing rapidly.

The official purchasing managers index (PMI) fell to 50.4 from 53.3 in April, the China Federation of Logistics and Purchasing said in a statement.

A reading above 50 indicates expansion, while a reading below 50 suggests contraction. Later, HSBC said its PMI for May stood at 48.4 compared with 49.3 in April.

In the United States on Thursday, the government lowered its estimate for first-quarter economic growth, to 1.9 percent from 2.2 percent, raising questions over how much of a rebound could be expected in the current quarter.

Two jobs reports — weekly unemployment claims and private-sector job creation in May — both were disappointing, indicating slow improvement in the economy.

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“A slowdown in the rate of growth from both the US and China has added bearish sentiment to future oil demand as US oil stockpiles nudge close to record highs and Chinese manufacturing activity remains sluggish,” Hornby added.

“Risk appetite is low with the economic uncertainty surrounding global markets and with no set remedy for the eurozone debt crisis on the horizon, the global economy will continue to suffer as a result.”

Eyes are now on key non-payroll jobs data out of Washington later Friday for the latest reading on the health of the US economy, which is the world’s largest oil consumer.

“Brent is clearly driven lower by the bearish macro sentiment,” SEB commodities analyst Filip Petersson told AFP.

“Several factors are conspiring here. Europe is obvious, a new wave of contagion fear is spreading and leaders seem paralysed. US data also continues to come in below expectations even though the situation there is less acute.

“However, inventories are at the highest level in decades and that naturally weighs on crude.”

The oil price declines in the past week followed the worst month for the market since December 2008.

Brent oil prices slumped by 15 percent during May, while WTI collapsed by 18 percent.

In recent days, the market has been pounded amid spreading fears over Spain’s troubled banking sector.

Demand has also been hurt by the plunging euro, making dollar-priced crude more costly for eurozone countries, denting demand and helping push prices lower.

Concerns were further exacerbated by Thursday’s weekly oil stockpiles report which showed an increase of 2.2 million barrels. Stockpiles in the United States now stand at the highest level in 22 years for this time of the year.