Forexpros – Crude oil futures extended sharp losses from the previous session on Tuesday, tumbling to an 11-month low as mounting fears over the global economic recovery weighed on future demand expectations, while an overall sense of risk aversion prompted investors to shun riskier assets.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September traded at USD78.45 a barrel during European morning trade, plunging 3%.
It earlier fell as much as 5% to trade at USD75.72 a barrel, the lowest price since September 29, 2010.
Crude prices dropped sharply on Monday, tumbling nearly 6.5%, as market sentiment was rattled following an historic downgrade of U.S. government debt by ratings agency Standard & Poor’s.
Meanwhile, a move by the European Central Bank to purchase Italian and Spanish government bonds failed to ease fears that the debt crisis could spill over to the region’s third and fourth largest economies.
Adding to global concerns, a report from China’s National Bureau of Statistics showed that consumer price inflation rose by a seasonally adjusted 6.5% in July, the fastest pace in three years.
The stronger-than-expected inflation data dampened hopes that the world’s second largest oil consumer would loosen monetary policy in the near-term.
Meanwhile, global investors remained on edge after the Dow Jones Industrial Average suffered its sixth-biggest drop on record on Monday, while Asian and European equities plunged dramatically on Tuesday amid mounting worries over the global economic outlook.
Markets were awaiting fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show stockpiles climbed by 1.5 million barrels last week, while gasoline stockpiles were projected to rise by 0.9 million barrels.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery dropped 2.85% to trade at USD101.25 a barrel, up USD22.80 on its U.S. counterpart.