Crude slumps as fears of double-dip recession build

09 August 2011 10:09  [Source: ICIS news]

SINGAPORE (ICIS)--Crude prices fell further on Tuesday, with ICE Brent briefly tumbling below $100/bbl, amid heightened fears of a significant weakening in the global economy, which will have a negative impact on oil demand.

At 08:31 GMT, September Brent crude on London’s ICE futures exchange was trading at $100.91/bbl, down by $2.83/bbl from the previous close. Earlier, the North Sea benchmark fell to a session low of $98.74/bbl, down by $5.00/bbl and lowest level since early February 2011.

September NYMEX light sweet crude futures (WTI) were at $78.05/bbl, down by $3.26/bbl from the previous close. Earlier, the contract price fell to an intra-day low of $75.71/bbl, down by $5.60/bbl, its lowest level since September 2010.

Crude prices have fallen around $15/bbl since the start of August.

The decline in crude prices accelerated on Monday, with both Brent and WTI futures falling more than $5/bbl, after Standard & Poor’s (S&P) cut the credit rating of the  US – the world’s largest oil consumer – from “AAA” to “AA+”.

Fears have been raised that the debt-laden US and European economies could slip back into recession, and trigger another global economic crisis.

There were also concerns about inflation in China, the world’s second largest oil consumer, after data revealed higher than expected inflation levels in July.

Data from China’s National Bureau of Statistics revealed that consumer prices rose by 6.5% in July compared with the same month last year. Economists had expected the July figure to dip to 6.3%, after reaching 6.4% in June.

Asian equity markets fell on Tuesday after the worst sell-off Wall Street had seen since late 2008 amid growing concerns over the health of the global economy. The Nikkei 225 Index in Japan was down 1.68% at 8,944.48.

Analysts forecast that weekly US crude and oil product inventory data will reveal substantial stock builds. US crude stocks were expected to rise after releases from the Strategic Petroleum Reserve (SPR) were moved into commercial stocks.

($1 = €0.70)

By: James Dennis
+65 6780 4359

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