Forexpros – Crude oil futures fell sharply on Monday, extending losses from the previous session as worries over Spain’s debt woes and disappointing Chinese economic growth data added to concerns over the global economic outlook, while easing fears over a military conflict between Iran and the West further weighed.
On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded at USD102.61 a barrel during European morning trade, shedding 0.7%.
It earlier fell by as much as 0.95% to trade at USD101.84 a barrel, the lowest since April 11.
The cost of insuring Spanish government debt against default rose to an all-time high on Friday, after a report showed that Spain’s banks borrowed a record amount from the European Central Bank in March, underlining concerns about the health of the sector.
Spanish 10-year yields rose above the key 6.0%-level in early trade Monday, hitting 6.1%, the highest since December 1. Similar-maturity Italian yields increased to 5.64%, while Portuguese yields climbed to 12.6%.
There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears Spain will be the next in the euro zone to require a bailout.
Also weighing on market sentiment were Chinese growth figures released on Friday, showing that the Chinese economy grew at the slowest pace in almost three years in the first quarter.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
A deeper slowdown in China would impair a global expansion that is already faltering because of the implementation of harsh austerity measures in Europe.
The news prompted investors to shun riskier assets, such as stocks and industrial commodities, and flock to the relative safety of the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.3% to trade at 80.27, the highest since April 5.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Meanwhile, Iran and six world powers met over the weekend in Turkey to discuss Tehran’s disputed nuclear program.
According to delegates that attended the meeting, progress was made with the negotiators planning to meet again on May 23 for a follow-up meeting.
The stand-off between Iran and Western countries has dominated sentiment in the oil market in recent months, pushing up prices from USD75 a barrel in October to as high as USD110 in early March.
But prices have been under pressure since hitting USD110 a barrel in early March as the market is now balancing assurances from Saudi Arabia that it would make up for any supply shortfalls against the potential risk for the loss of oil from Iran.
The Kingdom’s Oil Minister Ali al-Naimi said on Friday that there is currently no shortage in global oil supply. In a statement, Mr. al-Naimi added that his country was determined to see lower prices.
Saudi Arabia and Iran are the two largest oil producers and exporters among OPEC members.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for June delivery fell 1.08% to trade at 119.91 a barrel, with the spread between the Brent and crude contracts standing at USD17.30 a barrel.
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