Oil prices dive on US recession fears
Oil prices fell on Wednesday as a dramatic US interest rate cut failed to end concerns about a recession in the US.
By Agencies |
LONDON: Oil prices fell heavily on Wednesday as a dramatic US interest rate cut failed to end concerns about a recession in the United States, the world's biggest consumer of energy.
New York's main contract, light sweet crude for delivery in March, sank 1.30 dollars to 87.91 dollars per barrel. The February contract expired on Tuesday at 89.85 dollars.
Brent North Sea crude for March slid 1.22 dollars to 87.23 dollars. In an unexpected move Tuesday, the Federal Reserve slashed its key interest rate by an unprecedented 75 basis points to 3.50 per cent in an effort to steady global stock markets which have been badly spooked by fears of a US recession.
However, analysts said the Fed's move had not reassured the oil market. "I think everyone agrees that the interest rate cut was the right direction for the US government to take to help ease the fall in the equities market but it seems that news has not gone through to commodities speculators," said Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo.
"The fear of a recession is still there," he said, and investors still believe the interest rate cut is not enough to ward off recession.
Since the start of the year, the oil market has been dogged by fears that a US-led global economic slowdown could crimp world demand for energy.
Petromatrix analyst Olivier Jakob said while the US rate cut "stopped the haemorrhaging on global markets ... full confidence is still not back."
The oil market is also awaiting a February 1 meeting of the Organisation of the Petroleum Exporting Countries (OPEC) in Vienna.
"The market does not expect OPEC to increase output but there is speculation that there might be a decision to cut down supplies," said Victor Shum, of international energy consultancy Purvin and Gertz in Singapore.
Leading energy consultants CGES had warned Monday that global growth could be further endangered if OPEC decides to cut output next month.
Oil prices now have shed about 12 percent since striking a record high of 100.09 dollars in New York at the start of January.
On Thursday, meanwhile, traders' attention will turn to energy stockpiles in the United States. The US Department of Energy publishes its weekly inventories report one day later than normal owing to a public holiday on Monday.
New York's main contract, light sweet crude for delivery in March, sank 1.30 dollars to 87.91 dollars per barrel. The February contract expired on Tuesday at 89.85 dollars.
Brent North Sea crude for March slid 1.22 dollars to 87.23 dollars. In an unexpected move Tuesday, the Federal Reserve slashed its key interest rate by an unprecedented 75 basis points to 3.50 per cent in an effort to steady global stock markets which have been badly spooked by fears of a US recession.
However, analysts said the Fed's move had not reassured the oil market. "I think everyone agrees that the interest rate cut was the right direction for the US government to take to help ease the fall in the equities market but it seems that news has not gone through to commodities speculators," said Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo.
"The fear of a recession is still there," he said, and investors still believe the interest rate cut is not enough to ward off recession.
Since the start of the year, the oil market has been dogged by fears that a US-led global economic slowdown could crimp world demand for energy.
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Petromatrix analyst Olivier Jakob said while the US rate cut "stopped the haemorrhaging on global markets ... full confidence is still not back."
The oil market is also awaiting a February 1 meeting of the Organisation of the Petroleum Exporting Countries (OPEC) in Vienna.
"The market does not expect OPEC to increase output but there is speculation that there might be a decision to cut down supplies," said Victor Shum, of international energy consultancy Purvin and Gertz in Singapore.
Leading energy consultants CGES had warned Monday that global growth could be further endangered if OPEC decides to cut output next month.
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Oil prices now have shed about 12 percent since striking a record high of 100.09 dollars in New York at the start of January.
On Thursday, meanwhile, traders' attention will turn to energy stockpiles in the United States. The US Department of Energy publishes its weekly inventories report one day later than normal owing to a public holiday on Monday.
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