Oil prices slid towards $72 a barrel yesterday and seemed set for a third straight session of losses after negative data stoked concerns about the effects of the European debt crisis on global fuel demand. Investors have had less appetite for oil after a series of reports released on Tuesday showed manufacturing growth fell across the globe last month.
But a rebound in US stocks ahead of monthly data on pending home and car sales in the world's largest energy consumer caused oil prices to pare their losses during the day. US crude prices for next month fell 34 US cents to $72.24 a barrel late yesterday after losing nearly 2 per cent on Tuesday in a volatile session where prices swung in a $4 range. They briefly turned positive before the US stock market opened.
"The equities are recovering some of their losses," said Eugen Weinberg, an analyst with Commerzbank. "It will be very important to see what equities are doing as they have been an indicator for the level of risk aversion in the market." Sentiment in the oil market has been sour since US crude posted a 14 per cent monthly loss last month as the market weighed the impact of the spreading European debt crisis on demand in previously robust growth centres such as Asia.
The euro has slid to a near four-year low against the dollar this week and this has quelled buying interest. A weak euro makes dollar-denominated oil more expensive. Late last month, money managers flushed out long positions in crude oil and this contributed to the sharpest monthly fall in prices since 2008. Adding to the uncertainty was news late yesterday that tropical cyclone Phet was heading towards the coast of Oman, strengthening quickly on its way to becoming a powerful, category five storm.
Phet is not expected to make landfall in Oman. For now, it is also expected to steer clear of the Gulf and the Strait of Hormuz, through which 40 per cent of all seaborne oil trade passes, or about 17 million barrels a day. * Reuters