Oil falls to seven-month low under 68 dollars

19th May 2010, Comments 0 comments

World oil prices fell sharply on Wednesday to the lowest level in more than seven months, hampered by a strong dollar and concerns about the impact of the eurozone crisis on energy demand.

New York's main contract, light sweet crude for delivery in June, plunged to 67.90 dollars a barrel -- the lowest level since September 30, 2009.

It later recovered to 68.13 dollars, down 1.28 dollars from Tuesday.

London's Brent North Sea crude for July sank 83 cents to 73.60 dollars.

Stock markets slumped globally on Wednesday and the euro dropped to a four-year low, hit by unexpected German trading controls and stubborn eurozone debt concerns.

The European single currency nosedived to 1.2144 dollars in early trade, hitting its the lowest point since April 17, 2006.

"The market remained under pressure with the US currency rallying to new highs against the euro," said VTB Capital analyst Andrey Kruchenkov.

"Risk sentiment remained sour, still dictating direction to the broader commodities market."

A stronger US currency makes dollar-priced oil more expensive for holders of weaker currency units, denting demand and pushing prices lower.

The single European currency has remained weak despite eurozone finance ministers putting together a trillion-dollar (750-billion-euro) debt rescue package for the region.

Investors remain worried that austerity measures announced by Greece and other debt-laden eurozone countries could hurt growth and consumption in Europe, weighing on energy demand.

"The ongoing concerns over European debt are still very much lingering in the minds of every investor," said Serene Lim, a Singapore-based oil and gas analyst with ANZ bank.

"As such, the dollar has increased and that has also weighed on oil prices."

Lim said oil prices were likely to fall further if stockpiles in the United States, the world's biggest economy and largest energy consumer, continued rising. Rising stockpiles indicate weak demand.

"We are also not seeing a lot of crude (supply and demand) fundamentals trying to support prices. Unless we see ... demand increase substantially, I think concerns on the Europe side will continue to weigh on the price," Lim said.

The US government's weekly snapshot of energy stockpiles is due later Wednesday.

The US Department of Energy said last week that crude stockpiles for the week ended May 7 rose 1.9 million barrels, more than double the amount forecast by analysts.

© 2010 AFP

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