Oil plunged in New York after Standard & Poor’s lowered the U.S. credit rating from the highest level, stoking concern that an economic slowdown in the world’s biggest crude consumer will worsen and cut fuel demand. Futures tumbled as much as 3.7 percent to trade near the lowest intraday price in more-than eight months after S&P announced on Aug. 5 that it had cut the AAA rating to AA+ in response to the deal President Barack Obama and lawmakers reached to raise the $14.3 trillion debt limit. Asian stocks, U.S. equity futures and the dollar also fell. Group of Seven nations said they’ll take action to stabilize financial markets. “Oil will remain soft while optimism is dashed and consumer confidence is under pressure,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts crude in New York will average $100 a barrel this year. “There’s a little bit of carnage, there’s no doubt. It’s just overkill at the moment, a knee-jerk reaction.” Crude for September delivery fell as much as $3.20 to $83.68 a barrel in electronic trading on the New York Mercantile Exchange, and was at $84.00 at 1:32 p.m. Sydney time. The contract rose 25 cents to settle at $86.88 on Aug. 5 after dropping as low as $82.87, the lowest intraday price since Nov. 26. Prices slid 9.2 percent last week, the biggest decline since May, and are up 3.2 percent the past year. Brent oil for September settlement was at $106.52 a barrel on the London-based ICE Futures Europe exchange after sliding as much as 2.9 percent to $106.20. The European benchmark contract was at a premium of $22.59 to U.S. futures, compared with a record close of $22.67 on Aug. 2. Global Sell-off “While the U.S. downgrade is dominating headlines, troubles in Europe are also undermining markets,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, wrote in a note today. The bank estimates oil will average $100 a barrel in the third quarter. “Progress in dealing with the euro-zone sovereign debt remains painfully slow.” The European Central Bank yesterday called on all euro-area governments to follow through on the measures agreed at a July 21 summit, including allowing the European Financial Stability Facility to purchase bonds on the secondary market, according to a statement issued in the name of President Jean-Claude Trichet after an emergency teleconference meeting of policy makers. More than eight shares fell for each one that rose on MSCI’s Asia Pacific Index, which declined 7.8 percent last week, the steepest loss since October 2008. The MSCI All-Country World Index fell 0.1 percent today, following an eight-day, 11 percent slump spurred by a worsening European debt crisis worsened and reports on U.S. manufacturing and consumer spending that showed the world’s largest economy was slowing. Bullish Bets Cut Hedge funds cut bullish bets on crude oil by the most in more than six months on growing concern that the faltering economic recovery will sap energy demand, data showed last week. The funds and other large speculators cut wagers that prices will rise by 16 percent in the week ended Aug. 2, the most since Jan. 25, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Crude dropped 5.8 percent on the New York Mercantile Exchange in the period covered by the data. Analysts surveyed by Bloomberg News before the U.S. ratings downgrade predicted crude in New York may decline this week on speculation the economy will weaken and reduce fuel consumption. Eighteen of 35 analysts, or 51 percent, forecast oil will decrease through Aug. 12. Nine respondents predicted prices will increase and eight estimated there will be little change. Goldman Sachs Group Inc. maintained its 2012 forecast for Brent crude at an average of $130 a barrel and recommended investors hold a “long” trading position on December 2012 contracts, analyst David Greely said in an e-mail today. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Jane, Ching Shen Lee at jalee@bloomberg.net

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