World oil prices dived on Thursday, with Brent crude slumping below 70 dollars a barrel, as massive falls on world stock markets left traders worried about risky crude investments, analysts said.The price of London’s Brent North Sea crude for September delivery sank 1.74 dollars to 69.90 dollars per barrel.
New York’s main futures contract, light sweet crude for delivery in September, shed 1.32 dollars to 72.01 dollars per barrel.
“Crude futures were sharply lower (on Thursday), losing well over 1.0 dollar per barrel in both London and New York, reversing yesterday’s gains amid more risk aversion and as credit woes worsened,” said Sucden analyst Andrey Kryuchenkov.
Global equity markets shed tens of billions of dollars in value on Thursday owing to mounting concerns about a possible global economic slowdown caused by the problems in the US housing market.
Sliding shares are fuelling risk aversion among investors, who are pulling money out of assets they perceive as risky, such as oil, in favour of safer government bonds and currencies like the dollar.
Some traders are also liquidating their holdings in oil futures to cover losses in other markets, analysts said.
“Commodity markets remain in turmoil as fall-out from the US mortgage-backed securities crisis continues,” said analysts at Barclays Capital.
“In the short term, financial market movements are likely to remain a key driver of price direction.”
Added to the picture, many traders fear that the current stock market downturn could feed through into slower global economic growth — and falling demand for crude oil.
Last week, crude futures shed more than 7.0 percent in London and almost 6.0 percent in New York as traders fretted over the impact on oil demand.
Prices were also pushed lower on Thursday by reports that Tropical Storm Dean would likely spare key US oil facilities in the Gulf of Mexico.
“A combination of the hurricane veering away from the Gulf and weakness on the stock markets could see prices coming down more,” said Bache Financial trader Christopher Bellew.
Worries about the the storm and news that US crude inventories had tumbled last week sent oil prices rising on Wednesday.
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Tags: Barclays Capital, Brent Crude, Commodity Markets, Crude Futures, Futures Contract, Global Economic Growth, Global Economic Slowdown, Global Equity Markets, Government Bonds, Light Sweet Crude, Market Downturn, Mortgage Backed Securities, Oil Demand, Oil Facilities, Oil Futures, Risk Aversion, Tropical Storm Dean, Us Housing Market, World Oil Prices, World Stock Markets