Oil tumbles on fresh jitters over Greek debt crisis

19th September 2011, Comments 0 comments

World oil prices fell sharply on Monday, mirroring global equities, as traders fretted over the impact of the worsening Greek sovereign debt crisis, analysts said.

New York's main contract, light sweet crude for delivery in October, dived $2.20 to $85.76 a barrel.

Brent North Sea crude for November sank $2.67 to $109.55 in late afternoon trade.

Stocks slid after eurozone finance ministers failed over the weekend to find a convincing way to tackle the Greek crisis, delaying until October a decision on providing the next installment of a rescue loan for Athens.

The International Monetary Fund on Monday issued an ultimatum to Greece to step up privatisation under the international rescue programme. Markets were increasingly expecting Greece to default on its debt.

"The longer-term outlook appears weaker for oil prices," said Credit Agricole CIB analyst Christophe Barret.

"The economic environment remains very weak in Europe and the United States, renewing fears of a significant slowdown in the coming months. The European debt crisis appears largely unresolved, triggering fears of a possible financial crisis.

"More generally, Europe seems to have reached the limits of what could be done on the fiscal front, with poor results, and is now moving toward austerity policies."

European stock markets suffered a fierce sell-off as worries snowballed over Greece. Frankfurt shed 2.83 percent, London plunged 2.03 percent and Paris wiped out 3.0 percent in value.

Across the Atlantic, Wall Street also plummeted on worries about Athens and ahead of US President Barack Obama's release of a deficit-reduction plan. The Dow Jones Industrial Average plunged 1.90 percent in the first hour.

The euro meanwhile slumped as low as $1.3587 in afternoon London trade, before clawing its way back above $1.36.

"Crude oil prices started the week on a negative side, as weaker global equity markets and persistent concerns about Greek debt crisis weighed heavily on market sentiment and prompted investors to lock in recent profits," said Sucden analyst Myrto Sokou.

She added: "Greece's debt crisis will continue to dominate the markets, while the euro is likely to receive further pressure amid contagious fears in other eurozone's countries."

The IMF and EW warnings were a strong signal that the auditors are not ready to approve the next slice of funding under a first 110-billion-euro ($150 billion) rescue of Greece created last year.

Greece has signalled that without the eight billion euros in loans it has enough money to keep going until sometime next month.

Investors are also awaiting the results of a meeting on Tuesday and Wednesday of the US central bank's Federal Open Market Committee, which traders hope will announce fresh monetary loosening measures.


© 2011 AFP

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