Oil tumbles more than two dollars
World oil prices tumbled on Tuesday, shedding more than two-and-a-half dollars on the back of the stronger dollar, slumping equities, eurozone concerns and geopolitical fears over Korea, traders said.
New York's main contract, light sweet crude for delivery in July, dived 2.34 dollars to 67.87 dollars a barrel.
London's Brent North Sea crude for July plunged 2.54 dollars to 68.63 dollars.
"Persistent risk aversion and a sharp pull back on global equity markets still weighed on oil prices with persistent eurozone concerns," said VTB Capital analyst Andrey Kryuchenkov.
On Wednesday, "the market should briefly turn its attention to fundamentals of supply and demand but for now externalities continue to dictate correction.
"In London, support is back at February lows, while a break below 67.80 dollars would be very negative in case we do not stop and consolidate."
Global stocks plunged Tuesday and the euro fell close to a four-year dollar low as investors fled in the face of concerns about the eurozone and tensions between North Korea and South Korea.
Wall Street was in distress, with the Dow Jones Industrial Average dropping under the symbolic 10,000-point barrier just minutes after the opening bell as investors fled into safe-haven investments such as US government bonds.
"Crude oil prices ... retreated below the 68 dollars-per-barrel area," said Sucden analyst Myrto Sokou.
"A strengthening US dollar and weaker global equity markets weighed on the oil prices and hurt investor sentiment (about) the pace of the global economic recovery."
The European single currency sank as low as 1.2178 dollars as the US unit attracted investors hunting for a safe-haven. That was not far from the four-year low of 1.2144 dollars that was struck last week.
A stronger US unit makes dollar-priced crude more expensive for buyers using weaker currencies, denting demand, which leads to lower prices.
Financial markets, rocked by fresh turmoil in the Spanish banking sector, were also hit by the prospect of severe austerity measures in the eurozone that could slam the brakes on the fragile global economic recovery.
"Concerns about the pace and recovery of the global economy remain one of the critical factors behind the pressure" on oil prices, said analysts at JBC Energy consultancy in Vienna.
"Political tensions in Asia are also affecting markets with news that North Korea's (leader0 Kim Jong Il ordered troops into combat readiness."
European equities were down 3.0-5.0 percent in late afternoon trade, with London striking the lowest level since early September 2009.
The Organisation of Petroleum Exporting Countries is "not yet" concerned by the decline of oil prices below 70 dollars a barrel, Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said on Tuesday.
"Not yet," Sheikh Ahmad told reporters when asked if OPEC was worried. "So what?" he added.
The Kuwaiti minister, whose country is OPEC's fifth-largest producer, said that at present the cartel does not need to hold an emergency meeting to discuss prices.
"We only ask for more compliance" with production quotas, said Sheikh Ahmad.
However, he was hopeful thatoil prices would stabilise at between 75 and 85 dollars.
On Wednesday, traders will switch their attention to the latest snapshot of oil inventories from the United States, the world's biggest consumer of energy.
© 2010 AFP