Oil prices slump as U.S. downgrade stokes demand worries
World oil prices slumped Monday over fears of slowing energy demand in the United States after a shock credit rating downgrade for the world’s biggest economy, analysts said.
New York’s main contract, West Texas Intermediate light, sweet crude for delivery in September, plunged $3.40 to $83.48 a barrel.
Brent North Sea crude for September shed $3.37 to $106 in London deals approaching midday.
The United States saw its top-notch AAA credit rating downgraded for the first time on Friday, when Standard & Poor’s cut it to AA+ with a negative outlook on concerns over its debt.
“Prices are subsequently under enormous pressure as the new trading week kicks off,” Commerzbank analyst Carsten Fritsch said.
“Further losses can be expected in the near term, as financial investors should reduce risk positions on the back of high risk aversion and the uncertain economic outlook.”
The US is the world’s biggest consumer of crude oil.
Oil plummeted last week on both sides of the Atlantic, driven by evidence of faltering US economic growth and worries about European energy demand amid spreading eurozone debt contagion.
Global financial markets remain on edge over concerns that Italy and Spain could fall victim to the eurozone debt crisis, which has already snared Greece, Ireland and Portugal.