LONDON (SHARECAST) - Oil prices plummeted well below $100 a barrel on Tuesday, as ongoing anxiety regarding the global economic recovery sparked demand concerns.
Brent crude dropped by more than $5 in the early hours to $98.74 a barrel, representing a 22% fall from the $127 peak in April. By 09.43am in London, prices edged back over the $100 mark to trade at $101.89.
Meanwhile, WTI crude (US crude) was $2.29 lower at $79.02, recovering somewhat after hitting an 11-month low of $75.71 earlier on.
Adding to the downward pressure on oil prices was data from China, which showed that inflation had reached 6.5% in July, with prices rising at their fastest rate in over three years. Speculation that interest rates may stay elevated to battle inflation strengthened concerns over economic growth and, in turn, the country’s demand for oil.
Last night, Wall Street saw its first day of trading since ratings agency Standard & Poor's (S&P) cut the US's debt rating from AAA was every bit as rough as some pundits feared. The Dow Jones industrial average shed 634 points to 10,809 while the S&P 500 tumbled 80 points to 1,119. The NASDAQ Composite index dived 174 to 2,357.
Investors feared that the ratings cut may presage a slowdown in the recovery of not just the US economy, but the global economy.
Shortly after, the Nikkei in Asia sank over 4% as panicked investors fled from equities, but the index settled well off earlier lows as bargain hunters moved in. The benchmark Nikkei 225 index closed down 153 points or 1.68% at 8,944.
In early trading in London, the blue chip index plummeted well below the 4,900 mark to 4,856 by 09.43am.
Meanwhile, the gold price rose hit a new record on Tuesday as the global sell-off in equity markets shifted investors’ weightings to safe havens. By 09.43am, gold futures rose 2.33% to $1,753.20 an ounce.
Commodity analysts from JP Morgan were reported to have predicted the price of bullion to surge beyond $2,500 by the end of the year.
