- NEW YORK: Oil fell more than $3 a barrel as a raft of weak US economic data provided a fresh blow to shaky investor confidence, extending US crude’s losses to 13 percent so far in August.
- Equities plunged, volatility jumped and gold hit a fresh record as traders said fears of a new recession were growing again, sparking another round of risk aversion reminiscent of the violent selloffs at the start of this month.
Brent crude fell as much as $3.60 a barrel to $107.00 at one stage, on course for the biggest percentage loss in 10 days.
US crude dropped more than 5 percent.
Thursday’s declines follow a short-lived rebound that had seen Brent climb by around $9 in the previous six sessions.
“It’s much of the same — concerns over European banks, US deficits weighing on economic growth and the possibility of a global recession as the end result,” said Chris Jarvis, senior analyst for Caprock Risk Management in Hampton Falls, New Hampshire.
“These cross currents are driving wild swings for riskier asset classes such as equities and commodities, specifically crude oil. Until clarity improves, we expect volatility to remain elevated relative to historical norms.”
At 12:38 p.m. EDT (1638 GMT), Brent crude was down $3.45 at $107.15 a barrel, just below the 200-day moving average, a key technical indicator closely watched by traders.
US crude oil was down $4.50, more than 5 percent, at $83.08 a barrel. US crude’s discount to Brent widened to over $24 a barrel.
Early pressure from disappointing US weekly jobless claims and July home sales reports sparked a steep selloff
mid-morning. Selling then intensified after a report showed factory activity in the US Mid-Atlantic region in August dropped to the lowest level since March 2009.
Implied volatility in the oil market soared, with the Chicago Board Options Exchange’s Oil Volatility Index hitting
54.23 percent, its highest level in more than a week and snapping a steady downtrend.
“The market is in meltdown mode; the data continues to stink. I don’t know that there’s much more to be said. We continue to be in a soft patch,” said Sal Catrini, managing director for equities at Cantor Fitzgerald & Co. in New York.
The dollar rose and gold hit a new record of $1,825.99 an ounce as investors sought safe havens away from equities and industrial commodities.
US stocks tumbled 4 percent and the Reuters-Jefferies CRB, an index tracking 19 commodities, was down 2.4 percent in the steepest one-day loss since the US credit downgrade earlier this month by Standard and Poor’s.
Analysts have revised down forecasts for fuel consumption in recent weeks as concerns about global growth rose, with Morgan Stanley the latest bank to cut its forecast for global gross domestic product in 2011 and 2012.
Concerned the European debt crisis might spread to US banks, the Federal Reserve Bank of New York has asked for more information about whether the US units of big European lenders have reliable access to funds needed to operate, the Wall Street Journal reported.
The oil market is also closely watching developments in Syria and Libya, where crude exports have been disrupted by a six-month civil war. Libyan rebels took control of an oil refinery and blocked a main highway, further isolating Muammar Qaddafi’s Tripoli stronghold.
US President Barack Obama banned US imports of Syrian oil as part of sanctions against Amman, and joined the European Union in calling for President Bashar Al-Assad to step down after a five-month crackdown on protesters.
Syria supplies a small amount of oil to the US,shipping about 10,000 barrels per day of refined products to the world’s top consumer in the first five months of 2011, out of total imports of near 9 million bpd.
