Oil prices slumped on New York and London markets Aug. 4 upon concerns about the global economy, fueled by a combination of the European Central Bank’s resuming bond purchases and diving US stock values.
European leaders face a widening debt crisis that started in Greece and spread to Italy and Spain. Analysts report rising concerns about European banks heavily invested in the debt of countries having financial problems.
James Zhang, an analyst with Standard New York Securities Inc., the Standard Bank Group, said the market “took a dim view of the ECB’s assessment of market conditions and fled to safety.”
The Dow Jones Industrial Average posted its worst drop since December 2008, falling 512.76 points.
Consequently, energy commodities came under immense pressure, noted Barclays Capital analysts.
“The precipitous fall in prices [Aug. 4] was trigged by a combination of technical stop-losses and broad-based risk aversion rather than any direct changes in underlying oil market fundamentals,” said Barclays analyst Amrita Sen.
The September contract for benchmark US sweet, light crudes dropped $5.30 to $86.63/bbl Aug. 4 on the New York Mercantile Exchange. The October contract lost $5.29 to $87.04/bbl. On the US spot market, WTI at Cushing was down $5.30 to $86.63/bbl.
Heating oil for September delivery declined 12.5¢ to $2.89/gal on NYMEX. RBOB for the same month fell 19.4¢ to $2.74/gal.
The September contract for natural gas decreased 15¢ to $3.94/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., slipped 7¢ to $4.20/MMbtu.
In London, the September IPE contract for North Sea Brent dropped $5.98 to $107.25/bbl. Gas oil for August was down $20.25 to $934.00/tonne. The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $3.07 to $107.48/bbl.