Wednesday July 8, 09:32 AM
Oil continues to dive on recovery concerns
SINGAPORE (AFP) - Oil prices plummeted closer towards 62 dollars in Asian trade Wednesday as concerns continued to grow that a recovery from the worldwide recession was unlikely soon.
In afternoon trade New York's main contract, light sweet crude for August delivery, was down 53 cents to 62.40 dollars a barrel, extending sharp falls in US trade overnight.
Brent North Sea crude for delivery in August eased 70 cents to 62.53.
New York crude has lost more than 11 dollars and Brent more than 10 dollars since June 30 when prices for both contracts rose to more than 73 dollars a barrel, their highest levels this year.
"Oil continues to trade along with the financial markets," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
"Weeks ago, both stock markets and oil markets traded hand in hand going up. Now, stock markets are tumbling and oil is also tumbling, and that's because of renewed concerns that the recovery from the global recession is likely to be slow."
Doubts over a global economic bounce were rekindled following the June unemployment report in the United States, which showed bigger-than-expected job losses.
On Tuesday, Laura Tyson, a member of US President Barack Obama's Economic Advisory Panel, said the United States may need a second stimulus package to put the world's biggest economy firmly on the path to recovery.
Investors are also cautious as companies around the world start reporting their June quarter earnings, which could give an indication on the health of the global economy and its prospects for the rest of the year, Shum said.
"For oil futures, the fundamentals have been weak all along so the pullback is consistent with the weak fundamentals," he said, referring to demand lagging a glut in oil supplies.
Shum said that with appetite for risky assets in check, investors are going for relatively safer investments such as the US dollar, pushing the US currency higher.
A stronger greenback makes dollar-priced oil more expensive for holders of weaker currencies, a situation that dampens demand for the commodity and leads to lower prices.
Prices are likely to fall below 60 dollars in the near term, Shum said.
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