Oil prices sink as Germany kindles euro fears

24th November 2011, Comments 0 comments

Oil prices tumbled on Wednesday as a poor German bond sale pushed Europe's debt crisis to new depths and amid slumping manufacturing activity in top global energy consumer China.

New York's main contract, light sweet crude for January, sank $1.84 to close at $96.17.

In London, Brent North Sea crude for delivery in January dived $1.73, settling at $107.02 a barrel.

Prices were hit by the stronger greenback, which makes dollar-priced oil more expensive for buyers holding weaker currencies.

The European single currency tumbled Wednesday to a fresh six-week dollar low, as a surprisingly weak German bond sale intensified concerns over the eurozone sovereign debt crisis.

At about 2130 GMT, the euro slumped to $1.3342, levels not seen in a month.

Investors shunned Wednesday an issue of German 10-year bonds, considered the gold standard of eurozone debt, making bids of only 3.9 billion euros ($5.2 billion) for the 6.0 billion euros of securities on offer.

In addition, sentiment was hit by news that eurozone private-sector activity retreated for the third month running in November as businesses worry about the impact of the debt crisis on the economy, according to a key survey.

Meanwhile, China's manufacturing activity slumped to its lowest level in 32 months in November, banking giant HSBC said on Wednesday, renewing concerns that the Asian powerhouse is losing steam amid global economic woes.

The preliminary HSBC purchasing managers' index (PMI) dropped to 48 in November -- the lowest since March 2009 -- compared with 51 in the previous month. A reading above 50 indicates the sector is expanding while a reading below 50 suggests contraction.

"Oil prices are under pressure on the back of negative economic data from China," added Commerzbank analyst Carsten Fritsch.


© 2011 AFP

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