Forexpros – Crude oil futures came under heavy selling pressure during European morning trade on Monday, as investors cut their exposure to riskier assets amid concerns over the impact of weekend elections in France and Greece on the euro zone’s ongoing debt crisis.
On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded at USD97.60 a barrel during European morning trade, slumping 0.9%.
It earlier fell by as much as 2% to trade at USD95.36 a barrel, the lowest since December 20, 2011.
Oil prices extended sharp losses from Friday’s session, as market sentiment was rattled after Socialist challenger Francois Hollande defeated French President Nicolas Sarkozy and pro-bailout Greek political parties took a drubbing according to exit polls in from Sunday’s parliamentary elections.
The weekend election results triggered fresh uncertainty over Europe’s ability to tackle its debt crisis.
Hollande has recently called for a re-negotiation of Europe’s fiscal compact and its tough budget rules, while no political party won enough votes to form a government in Greece, prompting speculation the debt-strapped country could reject its newly signed aid package.
There are worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil. The euro zone accounted for nearly 12% of global oil consumption in 2010, according to data from British Petroleum.
Adding to the gloomy trade environment was a much weaker-than-expected U.S. jobs report on Friday, which added to uncertainty over the strength of the U.S. economic recovery.
The Department of Labor said the U.S. economy added 115,000 jobs in April, the smallest increase in six months and far short of expectations for a 170,000 increase, after adding an upwardly revised 154,000 jobs in March.
The unemployment rate ticked lower to 8.1%, the lowest since January 2009. However, the data showed that the decline stemmed entirely from people dropping out of the labor force.
The weak jobs report added to uncertainty over the strength of the U.S. recovery and raised concerns over a slowdown in oil demand from the U.S. after government data showed that U.S. oil supplies climbed to the highest level since 1990 last week,
The disappointing data 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 0.43% to trade at 79.94, the highest since April 16.
Oil prices tumbled nearly 4% on Friday, the biggest one-day drop since December 14. Oil’s losses accelerated after prices broke below a key technical support level close to its 100-day moving average, triggering fresh sell orders amid bearish chart signals.
Nymex crude prices have fallen nearly 12% since hitting a March 1 intraday peak of USD110.53 a barrel, as tensions have eased between Iran and Western nations over the country’s nuclear program and amid growing concerns over the health of the global economy.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for June delivery was down 0.7% to trade at 112.44 a barrel, with the spread between the Brent and crude contracts standing at USD14.84.
Brent crude, the European benchmark, is more than 12% off its intraday high of more than USD128 hit on March 1.
A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.
But revived talks between Iran and major powers over Tehran’s nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.
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