Wednesday July 8, 10:09 AM
Oil prices slump under $62 as equities slide
LONDON (AFP) - Oil dived Wednesday under 62 dollars to hit the lowest levels since May, as falling stock markets, a stronger US currency and the gloomy outlook weighed on sentiment ahead of the weekly US energy (USEG - news) report.
New York's main contract, light sweet crude for August delivery, dropped 74 cents to 62.19 dollars a barrel, after earlier touching 61.87 -- which was last seen on May 26.
London's Brent North Sea crude for delivery in August sank 55 cents to 62.68 dollars per barrel in morning London trade on Wednesday after earlier hitting 62.30 -- a level last reached on May 28.
"Equity markets have been falling back and the dollar has been strengthening -- both of these things are weighing in the (oil) market," said analyst Torbjorn Kjus at DnB NOR Markets.
European stock markets sank on Wednesday after Wall Street sustained heavy losses amid fresh worries about the global economy.
In Asia, Tokyo shares plunged 2.35 percent on Wednesday after New York's Dow Jones Industrial Average shed 1.94 percent overnight.
A stronger greenback meanwhile makes dollar-priced oil more expensive for holders of weaker currencies, which tends to dampen demand for the commodity and pull prices lower.
Later Wednesday, the US government's US Energy Information Administration (EIA) will publish its weekly report on American crude oil inventories for the week ending July 3.
Crude oil prices have fallen heavily this week on mounting concern that the battered world economy and weak energy demand was unlikely to recover any time soon.
"The force behind yesterday's (Tuesday's) sharp decline in crude was undoubtedly a renewed sell-off in the equity market with limited assistance from a strengthening US dollar," said ODL Securities analyst Marius Paun.
"However, the defining moment that triggered this shift in momentum from the up to the downside appeared to be last week's employment report.
"Today's EIA data is expected to provide limited guidance although any significant surprise has the potential of offering oil investors good trading opportunities."
Doubts over a global economic bounce were rekindled following the June unemployment report in the United States, which showed bigger-than-expected job losses.
New York crude has now lost more than 11 dollars and Brent more than 10 dollars since June 30 -- when both contracts had surged past 73 dollars a barrel to hit their highest levels so far this year.
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