MW: Oil stumbles on heightened worries about Europe
By Claudia Assis and Michael Kitchen, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil traded sharply lower Monday as concerns about the future of Europe rocked markets and raised doubts about demand for crude.
Crude oil for September delivery CLU2 -4.01% declined $3.57, or 3.9%, to $88.28 a barrel on the New York Mercantile Exchange.
The International Monetary Fund is set to stop aid payments to Greece, according to report in German magazine Der Spiegel. That would precipitate Greek insolvency as early as September, the report said.
The IMF issued a statement saying it supports Greece “in overcoming its economic difficulties.”
The worries sent bourses across the world stumbling, and the dollar gathering steam as a safe-haven investment. U.S. stocks opened sharply lower, also underscoring negative sentiment toward investments considered riskier such as oil and other commodities.
Spanish and Italian bond yields soared on Monday, adding to the concerns. Spanish bonds hit another euro-era record past 7% and Italian bond yields nudged toward 6.5%.
The European Commission, the European Central Bank, and the IMF are heading to Greece to assess the country’s progress in meeting its bailout requirements.
“This is not surprisingly causing a flight out of the euro (and subsequently into the US dollar), hence crude is getting clobbered,” said Matt Smith, an analyst with Summit Energy in Kentucky. “Add to this bearishness rumors and murmurs out of China that its economy could well drop below its growth target of 7.5% in the third quarter, and we have a royal sell-off on our hands.”
The ICE dollar index DXY +0.56% rose to 83.908 from 83.457 in late Friday North American trading.
Gains for the greenback are a negative for oil and other dollar-denominated commodities as it makes them more expensive to holders of other currencies.
On Friday, the front-month Nymex August oil contract lost 1.3% at $91.44 a barrel, snapping a seven-day winning streak but ending the week with gains of 5%. Read more on Friday’s crude-oil trade.
Most other products tracked crude lower, with August gasoline RBQ2 -3.13% down 9 cents, or 3.2% at $2.85 a gallon.
August heating-oil HOQ2 -3.14% declined 9 cents, or 3.3%, at $2.83 a gallon.
Natural gas for August NGQ12 -0.26% turned lower, off 2 cents, or 0.6%, to $3.06 per million British thermal units.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles.
