Oil prices slump after S&P warns on US debt
Oil prices slumped Monday after ratings agency Standard & Poor's cut the outlook on US sovereign debt to "negative" and as key industry bodies expressed concern about high energy costs on demand.
New York's main contract, light sweet crude for delivery in May shed $2.66 to $107 a barrel.
In late London trade, Brent North Sea crude for June slid $2.09 to $121.36.
Prices, which had already been falling on profit-taking, accelerated their losses after S&P issued its first warning on US sovereign debt, citing Washington's looming debt and fiscal deficit.
The United States is the world's biggest consumer of oil.
S&P "has caused consternation in almost every asset class from currencies to commodities to indices," said Ian O'Sullivan, analyst at trading group Spread Co.
US stocks opened sharply lower after the S&P warning, while the price of gold struck a record high just short of $1,500 an ounce in London trade as the precious metal profited from its safe-haven status.
Earlier, OPEC secretary general Abdullah El-Badri said the cartel was "concerned" by high crude prices.
"We see that there is a $15-20 premium risk at this time," Badri told reporters in Kuwait.
He was speaking ahead of a roundtable meeting for Asian energy ministers who went on to discuss the impact of high oil prices on the economy.
Badri's comments also came after the head of the International Energy Agency, Nobua Tanaka, said oil prices were "very high" and that his group was alarmed that this could undermine economic growth and demand.
In response, Gulf oil producers on Monday assured consumers of sufficient supplies to help stem rises in prices fuelled by sweeping unrest in the Middle East and speculative trades.
"Certainly, Saudi Arabia's position in the world oil market is based on its commitment to maintaining spare capacity for the sake of price and market stability," Saudi Oil Minister Ali al-Naimi told the roundtable meeting.
Naimi said the kingdom had spare capacity of more than 3.5 million barrels per day which Riyadh can use whenever the need arises.
Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said the situation is different from 2008, when oil prices shot to an all-time high of 147 dollars, because of the abundant spare capacity available.
But he said the "volatility of prices poses a significant dilemma," attributing the sharp rise in prices to a combination of factors.
"The increase in oil prices is due to the loss of large volumes of sweet crude from the market (Libyan oil), expansionary monetary policy, a weak dollar, fear of spread of political unrest to other producers and the resilient demand in ... Asia," the Kuwaiti minister said.
He also said that oil traders are driving prices higher and amplifying price signals through rampant speculative trade.
© 2011 AFP