Oil slumps more than 8 percent
Thursday, May 20, 2010 at 04:19PM (Reuters) - U.S. oil prices fell sharply on Thursday on worries that fiscal problems in Europe could stifle global economic growth and energy demand.
The expiring June contract on the New York Mercantile Exchange tumbled more than 8 percent to a nine-month low as remaining open interests were either rolled to the next month or sold, in an effort to avoid physical delivery.
The contract has fallen 26 percent since hitting a 19-month high of $87.15 on May 3.
"Oil prices are sliding on liquidations ahead of the June contract's expiration and as we have a glut of oil in the Cushing, Oklahoma, delivery point," said Phil Flynn, analyst at PFGBest Research in Chicago.
U.S. crude for June delivery fell $2.07 to $67.80 a barrel by 2:05 p.m. EDT in volatile trade ahead of expiry on Thursday. It slumped earlier to $64.24, the lowest since July 30.
Investor caution hit the rest of the oil complex, with the July contract down $2.52 at $69.96 a barrel, narrowing its spread against the expiring June to $2.16, from $2.61 at the close on Wednesday. ICE July Brent futures were down $2.80 at $70.89.
The U.S. Energy Information Administration on Wednesday reported that stocks at the Cushing delivery point rose 900,000 barrels to a record 37.9 million barrels in the week to May 14.
On Wall Street, all major equities indexes slid more than 3 percent on growing fears that the euro zone's handling of its sovereign debt crisis could jeopardize global economic growth. The Standard & Poor's 500 Index .SPX has fallen more than 10 percent from its April high, signifying a correction. .N
A slew of U.S. data on Thursday fueled further concerns about recovery in the world's top oil consumer and fueled more risk aversion.
Weekly initial U.S. jobless claims rose unexpectedly and an April index of U.S. leading economic indicators marked its first decline in over a year. Rising manufacturing activity in the nation's Mid-Atlantic region failed to stanch the oil market's bearish outlook.
"The fiscal crisis in Europe has been an eye-opener for markets. Even though we have a recovery, it's clear that it will be slow and painful and it's the same for oil demand," said Christophe Barret, oil analyst at Credit Agricole CIB.
The euro fell against major currencies, remaining vulnerable on concerns other European countries may announce regulations similar to Germany's bank on naked short-selling of some stocks and bonds.
Further pressure on crude came after industry data provider Genscape said that crude stored at the hub risen 500,000 barrels in the week to May 18 to a record 39.96 million barrels.
COMMODITIES TUMBLE
Oil's decline was part of a slump in an array of commodities on Thursday. The 19-commodity Reuters-Jefferies CRB index .CRB, a global commodities benchmark, fell 1.3 percent, having tumbled earlier to its lowest level since September.
Oil prices this week have fallen below the $70-$80 a barrel range that many members of the Organization of the Petroleum Exporting Countries have said is fair for both producers and consumers. But OPEC officials have stopped short of calling for any immediate steps to prop up the market.
The producer group's seaborne exports, excluding Angola and Ecuador, were forecast rising 280,000 barrels per day in the four weeks to June 5, according to a weekly estimate by UK consultancy Oil Movements released on Thursday. ID:WLA4611
Additional reporting by Matthew Robinson and Robert Gibbons in New York; Emma Farge in London; Judy Hua in Singapore
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