U.S. crude oil tumbled almost 6 per cent on Thursday and settled at the lowest level since February as fears of a sluggish economy triggered sell-off.
The New York benchmark WTI contracts fell for the fifth straight day, registering an accumulated decline of 10.81 dollars, or 11 per cent, since July 28.
"WTI has fallen into a new range from 64.25 to 87.15 dollars, in the area, you will see a lot of technical sell-off," said Raymond Carbone, president of oil brokerage Paramount Options. Carbone noted that economic concerns and fears of a shrinking demand were the main causes of the plunge.
After the debt crisis in U.S., the crude investors switched their focus to economic growth as more and more weak data pointed to a double-dip recession. Following a series of disappointing data, the initial jobless claims released on Thursday came in also less encouraging and pushed investors over the edge. Markets were expecting a shrinking oil demand.
The investors also kept close eyes on what was happening in Europe. The widening bond spreads for Italy and Spain made markets nervous. On Thursday, after leaving its interest rate unchanged at 1.5 percent, the European Central Bank (ECB) said it resumed buying government bonds after a four-month break in response to the deepening sovereign debt crisis. But the ECB unveiled no plan to buy Italian and Spanish bonds.
Fears of a worsening debt scenario sent European shares slipping sharply and the euro dropped 1.37 percent against the dollar. Soaring risk aversion made cash the king for investors. They escaped from riskier assets for cash.
Besides, the dollar soared on Thursday after Japan's central bank intervened to inject 1 trillion yen into the market, which followed an unexpected step taken by the Swiss central bank to slash interest rate. The dollar surged over 2 percent against the yen and jumped 1.6 percent against a basket of currencies. A rising greenback, short-lived or not, hurt the dollar-dominated commodities.
Light, sweet crude for September delivery plunged to 5.30 dollars, or 5.77 per cent to 86.63 dollars a barrel on the New York Mercantile Exchange. Gasoline also slumped for the seventh straight day, with the September contract off 19 cents, or 6.6 percent, to 2.74 dollars a gallon.
In London, Brent crude for September delivery plunged 5.98 dollars, or 5.28 percent, to close at 107.25 dollars a barrel.
