By Polya Lesova, MarketWatch
LONDON (MarketWatch) — Oil futures fell sharply on Monday, as the downgrade of the U.S. credit rating by Standard & Poor’s led investors to reduce exposure to assets perceived as risky and escalated worries about the economic outlook.
Crude oil for September delivery CL1U -3.58% dropped $3.09, or 3.6%, to $83.80 a barrel in electronic trading on Globex.
The contract earlier hit an intraday low of $83.18 a barrel, according to FactSet Research data.
“Further losses can be expected in the near term, as financial investors should reduce risk positions on the back of high risk aversion and the uncertain economic outlook,” Commerzbank analysts said in a note.
The declines came after late Friday Standard & Poor’s took the unprecedented step of downgrading the U.S. triple-A credit rating by one notch to AA+, and assigned it a negative outlook.
The move prompted steep declines for risky assets, while investors sought a safe haven in gold futures, which rallied above $1,700 an ounce. Wall Street seemed set for a sharply lower open, with futures on the Dow Jones Industrial Average DJ1U -2.00% down more than 200 points.
Polya Lesova is chief of MarketWatch’s London bureau.
