Oil prices slump by more than two dollars
World oil prices slumped on Wednesday after the euro hit a new one-year dollar low point amid worries about debt-laden Greece which shook global financial markets, traders said.
Brent North Sea crude for June delivery tumbled 2.56 dollars to 86.38 dollars a barrel in midday London trade.
New York's main contract, light sweet crude for June, dropped 2.84 dollars to 83.35 dollars.
"Oil pulled back as the dollar hit one-year highs and concerns over the health of the eurozone economies gripped markets once again," said analyst Marius Paun at trading house ODL Markets, in a note to clients.
"With traders fleeing the euro, they sought the relative security of the dollar, which put some downside pressure on oil.
"The overriding concern about the strength of the global recovery also sent jitters across commodity markets, with traders concerned that any issues in Greece may halt the recovery."
In foreign exchange trade on Wednesday, the European single currency slid to 1.2935 dollars -- hitting the lowest level since April 22, 2009.
Financial markets have come under heavy pressure after eurozone finance chiefs had over the weekend approved an unprecedented three-year package of loans for debt-ridden Greece.
Of the 110 billion euros (145 billion dollars) to be made available to Greece, the eurozone is set to provide 80 billion and the International Monetary Fund 30 billion.
And in a policy U-turn, the European Central Bank agreed to accept Greece's junk-rated government bonds as collateral for loans.
"A subprime sovereign debt situation is developing and the potential consequences rocked stock markets," said PVM analyst David Hufton.
"Such worries are infectious and they spread from Europe around the globe," he added.
Aside from Greece, the oil market has also this week been gripped by the Deepwater Horizon oil rig disaster in the Gulf of Mexico.
The rig, operated by British energy firm BP and owned by US contractor Transocean, sank on April 22 -- two days after a massive explosion killed 11 workers.
Since the explosion, at least 210,000 gallons of crude a day have been spewed into the Gulf of Mexico from a well below the rig.
Oil from the spill appeared to be lapping the shores of a pristine wildlife refuge of Louisiana's eastern coast on Tuesday, as BP sent a 22-strong flotilla in response.
Later on Wednesday, traders will switch their attention to the weekly snapshot of American energy inventories. The US government's Department of Energy will publish its key report at 1430 GMT.
© 2010 AFP