Oil resumes fall as economy weighs
Brent crude oil turned lower on Friday to hit a six-week low near USD 103 a barrel after an initial rally faded, on concern about the outlook for the economy and oil demand.
September 23, 2011 / 20:17 IST
Brent crude oil turned lower on Friday to hit a six-week low near USD 103 a barrel after an initial rally faded, on concern about the outlook for the economy and oil demand.
Financial markets also fell, with European shares turning negative as concern resurfaced that European banks would take further writedowns on their Greek debt exposure. The euro gave up gains against the dollar.Brent crude was down USD 1.42 at USD 104.07 by 1140 GMT, having traded as low as USD 103.45, the lowest since Aug. 10, earlier in the session. US crude declined USD 2.00 to USD 78.51."The situation is deteriorating in Europe," said Rob Montefusco, a trader at Sucden Financial. "It's all about market turmoil at the moment. The stock market has started to slide again, which is not helping, and the euro is not recovering."Oil has been under pressure over the past few days after the International Monetary Fund lowered its global growth forecast, followed by the US Federal Reserve's warning of "significant downside risks" to the economy.On Thursday, Brent lost USD 4.87 to settle at USD 105.49 on concern demand will fall as weak economic data from China and Europe triggered fears of a recession.Brent is down nearly 7% for the week and was down nearly 10% so far this month, heading for its largest monthly decline since May."It's too early to say if prices have bottomed, given economic concerns," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt on Friday, before oil's latest move lower.Despite the slump, JP Morgan maintained its price forecast of USD 115 a barrel for Brent for 2012, citing the prospect of supply curbs by OPEC producers to prop up prices."As long as producers are prepared to trim output back to mid-2010 levels, we believe that Brent is likely to remain in a USD 100 to USD 120 per barrel range, and it would likely require a recession as deep as 2009 or those seen in the early 1980s to trigger a material downgrade," the bank said in a report."A recession of that magnitude would necessitate a significant price adjustment."OPEC Secretary General Abdullah al-Badri said this week members that raised output to compensate for the shutdown of Libyan supplies will certainly reduce production as the North African country's output recovers. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
