Oil prices slide to multi-month lows
World oil prices slid to new multi-month lows on Friday as the market was rattled once again by concern about the outlook for demand linked to the eurozone debt crisis, analysts said.
Brent North Sea crude for delivery in July struck $106.40 per barrel, which was the lowest point since December 21. The contract later stood at $106.97, down 52 cents compared with Thursday’s closing level.
New York’s main contract, West Texas Intermediate (WTI) crude for delivery in June sank to $91.60 a barrel, hitting the lowest level since November 3. It later stood at $92.55, down one cent.
“Amid the sea of red seen in European credit and equity markets this morning, crude oil is maintaining a modicum of relative respect, with Brent and WTI only in modest negative territory,” said Sucden analyst Jack Pollard.
He added: “Last night’s long anticipated review of Spanish banks by Moody’s is seen exacerbating an already precarious situation in the eurozone with the current bearish tone distinctly reminiscent of late 2011.
“Meanwhile, we are inundated with various Greek opinion polls, seemingly in contrast to each other. Whether a pro- or anti-bailout party gets elected or if any at all remains unknown.”
Overnight, Moody’s slashed the ratings of 16 banks in Spain by between one and three notches, citing “renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment”. It also blamed the reduced creditworthiness of the government.
Fitch meanwhile downgraded Greece’s credit a notch, to CCC from B-, saying it was vulnerable to default amid political uncertainty over Athens’s commitment to a crucial bailout plan and its possible exit from the eurozone.
Prices have fallen considerably after soaring on the back of Middle East tensions earlier this year.
“A weakening of sentiment has brought oil prices down sharply… with sovereign debt fears a key element in a mounting loss of faith in economic, and hence demand, prospects,” added Barclays analysts in a commentary.
“The current bout of concerns have arisen from the resurgent fears about the Spanish and Italian banking systems and speculation that Greece may have to exit the euro,” it added.
In Greece, a caretaker technocrat government took office on Thursday to organise the debt-plagued nation’s second elections in just six weeks after an inconclusive May 6 vote.
The polls left Greece in limbo, pushing the financial markets and euro down sharply, and the new election on June 17 offers no guarantee of a viable government able to implement an EU-IMF bailout that has divided the country.