Oil falls to $70
Tuesday, 18 May 2010
LONDON, May 17 (Reuters): US oil prices fell below $70 a barrel on Monday to their lowest in over three months, extending a loss of more than 18 per cent so far in May on concerns over Europe's debts, the weak euro and swollen US oil inventories.
The euro sank to four-year lows as Europe's debt crisis led investors to pull more money from stocks in favor of havens such as gold and Asian bonds. Base metals slid to three-month lows as investors shunned riskier assets and on doubts over the prospects for growth.
US crude for June delivery fell more than $1 to a low of $69.82 a barrel, its weakest since February 5. It was trading at $70.65 by 4:44 a.m. ET, down 96 cents.
So far in May, the US crude contract has lost around 18.5 per cent, its biggest monthly drop since November 2008. The contract is expected to face volatility ahead of Monday's June crude options expiry and the May 20 June crude contract expiry.
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract's West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record high 37 million barrels, pushing front-month US crude down relative to later futures contracts and the other global crude benchmark, Brent.
July Brent crude lost 64 cents to $77.29 a barrel on Monday, holding up much better than its US counterpart.
Brokers MF Global expressed concern for the prospects of oil and some other commodities and cited an analysis of fund flows suggesting that while precious metals could outperform, "crude oil, copper, and aluminum could be relatively vulnerable."
"We are especially concerned with what is going on in China, and suspect that the base metal and energy markets in particular will be quite vulnerable on the first signs that Chinese growth is starting to wane-or ...(of) a rate hike," MF Global said.
Members of the Organization of the Petroleum Exporting Countries have said they think oil prices should be between $70 and $80, a range they say is fair for both consumers and producers. Recent price falls are worrying OPEC countries.
Kuwaiti oil minister Sheikh Ahmad al-Abdullah al-Sabah said last week OPEC was likely to meet if crude prices fell sharply.
"Sixty-five dollars would ring a bell ... and a meeting," he told reporters before an Arab Energy Conference.
But some traders believe such comments may be dangerous. MF Global said OPEC may just be giving the oil market a target:
"OPEC seems to be nonplussed by the recent decline, saying that it would not consider meeting until prices get to $65," MF Global said in a note to clients. "This effectively sets up a downside target that the markets will conceivably gun for, and one that is not outside the realm of possibility."
The euro sank to four-year lows as Europe's debt crisis led investors to pull more money from stocks in favor of havens such as gold and Asian bonds. Base metals slid to three-month lows as investors shunned riskier assets and on doubts over the prospects for growth.
US crude for June delivery fell more than $1 to a low of $69.82 a barrel, its weakest since February 5. It was trading at $70.65 by 4:44 a.m. ET, down 96 cents.
So far in May, the US crude contract has lost around 18.5 per cent, its biggest monthly drop since November 2008. The contract is expected to face volatility ahead of Monday's June crude options expiry and the May 20 June crude contract expiry.
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract's West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record high 37 million barrels, pushing front-month US crude down relative to later futures contracts and the other global crude benchmark, Brent.
July Brent crude lost 64 cents to $77.29 a barrel on Monday, holding up much better than its US counterpart.
Brokers MF Global expressed concern for the prospects of oil and some other commodities and cited an analysis of fund flows suggesting that while precious metals could outperform, "crude oil, copper, and aluminum could be relatively vulnerable."
"We are especially concerned with what is going on in China, and suspect that the base metal and energy markets in particular will be quite vulnerable on the first signs that Chinese growth is starting to wane-or ...(of) a rate hike," MF Global said.
Members of the Organization of the Petroleum Exporting Countries have said they think oil prices should be between $70 and $80, a range they say is fair for both consumers and producers. Recent price falls are worrying OPEC countries.
Kuwaiti oil minister Sheikh Ahmad al-Abdullah al-Sabah said last week OPEC was likely to meet if crude prices fell sharply.
"Sixty-five dollars would ring a bell ... and a meeting," he told reporters before an Arab Energy Conference.
But some traders believe such comments may be dangerous. MF Global said OPEC may just be giving the oil market a target:
"OPEC seems to be nonplussed by the recent decline, saying that it would not consider meeting until prices get to $65," MF Global said in a note to clients. "This effectively sets up a downside target that the markets will conceivably gun for, and one that is not outside the realm of possibility."