Oil prices slip on global recovery concerns
World oil prices drifted lower on Wednesday, with sentiment dampened by fears that the eurozone debt and deficit crisis could derail the global economic recovery and dent energy demand, traders said.
New York's main contract, light sweet crude for delivery in July, dropped 28 cents to 72.30 dollars a barrel.
London's Brent North Sea crude for July shed 12 cents to 72.59 dollars per barrel.
"The driver for oil prices at the moment is economic recovery: there's some evidence of it in the US and UK, but overall the concern is the eurozone debt crisis," said CMC Markets analyst Michael Hewson'
"We're looking at pared-back growth forecasts for the eurozone, and where this will lead for energy demand."
European stock markets sank further on Wednesday, with banks suffering on fears of exposure to eurozone debt and the energy sector hit by the BP oil spill disaster, dealers said.
Sentiment was hit this week after the European Central Bank suggested that eurozone banks might have to reduce the value of their assets by a total of 195 billion euros by 2011.
The ECB said in its twice-yearly Financial Stability Review that banks faced several challenges, including exposure to a weakening commercial real estate market, hundreds of billions of euros in bad debts, and a possible competition for refinancing with governments with swollen sovereign debt.
Banks would need to refinance long-term debt of around 800 billion euros (980 billion dollars) by the end of 2012, the central bank noted.
"Jittery trading (in the oil market) is here to stay for now as we continue to track the broader market and swings in global risk sentiment," added VTB Capital analyst Andrey Kryuchenkov on Wednesday.
Meanwhile, traders will have to wait until Thursday for the weekly snapshot of energy inventories in the leading energy consumer, the United States.
The report, normally due on Wednesday, was delayed by the US Memorial Day public holiday on Monday.
Oil had fallen sharply on Tuesday after a series of sluggish European and Chinese economic indicators also sparked concerns about energy demand.
In China, the world's second-largest energy-consumer after the United States, manufacturing activity slowed in May as government brakes to keep the economy from overheating kicked in, HSBC bank data showed.
A separate survey released by a Chinese government agency on Tuesday showed manufacturing activity had dropped to 53.9 in May from 55.7 in April.
The government survey predicted the Chinese economy would continue to grow rapidly, but at a moderately slower pace.
"Sentiment was sour (in the oil market) with further evidence that growth rates are moderating in China," said Kryuchenkov, but added that Chinese energy demand was still expected to expand rapidly in 2010.
© 2010 AFP