By Virginia Harrison, MarketWatch
SYDNEY (MarketWatch) — Crude oil futures retreated in electronic trading Thursday, after surging more than 3% in the North American session, as worries about the euro zone and the health of the global economy once again preoccupied investors.
Crude for December delivery lost 77 cents, or 0.8%, to $101.82 a barrel on the New York Mercantile Exchange during Asian electronic trading hours.
Oil had settled at its highest level in more than 5 months, at $102.59 a barrel, in Wednesday’s North American session.
The sharp rise was largely driven by news that Canada’s Enbridge Inc. would reverse the flow of a pipeline that moves oil between Gulf of Mexico to Cushing, Okla., the delivery point of the benchmark Nymex oil.
The news immediately drove hopes that supply bottlenecks in Cushing would be eased.
But worries about Europe’s debt situation continued to nag investors in Asian trading on Thursday, prompting selling across commodity and equity markets.
Rising bond yields in some euro zone nations, and a warning from ratings agency Fitch of the threat to U.S. banks should the European crisis worsen, damaged sentiment across global markets.
“The euro zone crisis is already undermining global business confidence, reducing risk appetite in financial markets and strengthening the US dollar, all-important negatives for commodity prices,”Julian Jessop, chief global economist at Capital Economics wrote in a research note.
Weaker sentiment can dampen crude investment, as a slowing global economy dulls the outlook for energy demand.
“Even if the crisis can be contained to the region, recession in Europe would still have a significant impact on commodity demand,” Jessop added.
Virginia Harrison is a MarketWatch reporter based in Sydney.
