Oil prices dive nearly $4 on demand fears, as equities dive
Crude oil prices sank nearly $4 on Thursday, after a fresh plunge in global stock markets, as traders fretted over warnings about a new vicious recession that could slam demand for energy.
New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in September, shed a hefty $3.84 to $83.74 a barrel.
Brent North Sea crude for October delivery dropped $2.85 to $107.75 a barrel in late afternoon deals.
Global stocks slumped Thursday as more weak data fuelled concern that the world was heading for another recession, and after the US Federal Reserve reportedly expressed concerns over European banks' liquidity.
Traders' screens were awash with red, as Madrid, Milan and Paris equities plunged more than 6.0 percent, while London, Paris and Zurich shed more than 5.0 percent in a panicky sell-off.
Wall Street plunged by about 4.0 percent in opening trade on Thursday after investment bank Morgan Stanley warned that the United States and Europe were teetering on the brink of a new recession.
"Our revised forecasts show the US and the euro area hovering dangerously close to recession," the US bank added in a new report which also slashed its growth forecasts.
The toxic cocktail of negative news sent gold flying to fresh records above $1,826 per ounce as investors sought the safe-haven precious metal, while oil slid even lower on worries about dwindling future demand for energy.
"We experienced another big sell-off in the global equity markets following fairly disappointing US economic data that currently weighs heavily in the oil market," said oil analyst Myrto Sokou at the Sucden brokerage in London.
"Crude oil prices have been under pressure amid ongoing concerns about lack of US oil demand.
"Following the gloomy macroeconomic picture and the recent big builds in oil supplies, we expect crude oil prices to extend recent losses, with potential for WTI to retest the $75-$80 level in the coming weeks."
Morgan Stanley meanwhile slashed its 2011 global growth estimate to 3.9 percent from 4.2 percent, and its 2012 forecast to 3.8 percent from 4.5 percent.
Adding to the market fears on Thursday, the US Federal Reserve Bank of Philadelphia said that manufacturing in the mid-Atlantic states took a sharp hit in August.
The bank said manufacturing activity "dipped significantly," lowering its index to negative 30.7 in August from positive 3.2 in July.
Data showing that new claims for US unemployment insurance rose last week also spooked investors. The figures showed new claims rose to 408,000 -- a gain of 9,000 from the previous week.
© 2011 AFP