Forexpros – Last week saw crude oil futures tumble to the lowest price in nearly six weeks as lingering fears over mass euro zone credit ratings cuts and an economic slowdown across the single currency bloc dragged down prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in January traded at USD94.08 a barrel by close of trade on Friday, tumbling 5.57% over the week, the worst weekly loss since late September.
Earlier Friday, crude prices fell to USD92.51 a barrel, the lowest since November 3.
Crude’s losses came as the U.S. dollar rallied to an 11-month high against the euro after a European Union agreement reached earlier in the month disappointed expectations for a comprehensive solution to resolve the region’s two-year-old debt crisis.
Euro zone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
The region accounted for nearly 16% of global oil consumption in 2010, according to data from British Petroleum.
After markets closed Friday, Moody’s Investors Service cut Belgium’s credit rating by two notches to Aa3, citing “increasing risks due to deteriorating market funding conditions”.
The downgrade came after Fitch Ratings announced that it lowered France’s rating outlook and put six other euro zone members, including Italy and Spain, on review for a downgrade, saying that a “comprehensive solution” to the euro zone crisis is “technically and politically beyond reach.”
Crude prices plunged nearly 5% on Wednesday, as lingering concerns over a possible mass downgrade in the euro zone prompted investors to shun riskier assets.
Sentiment was also dampened after the Federal Reserve refrained from signaling another round of quantitative easing at its last monetary policy meeting of the year.
Also last week, the Organization of the Petroleum Exporting Countries, which supplies nearly 33% of the world’s oil, agreed to a production ceiling of 30 million barrels per day.
Wall Street investment bank Goldman Sachs said in a report Friday that OPEC’s decision was positive for oil prices into the next year.
“The agreement would suggest other OPEC members would have to cut production further to accommodate anticipated growth in Iraqi and Libyan supplies,” the report said.
Crude prices were expected to remain supported by ongoing tensions between Iran and the West, which have raised concerns over a disruption to Iranian oil supplies. Iran is the world’s fourth largest oil producer.
On Tuesday, prices shot up to above USD101-a-barrel on an unconfirmed report that Iran shut down the key Strait of Hormuz shipping lane, which handles about 33% of all ocean-borne traded oil.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery settled at USD103.69 a barrel by close of trade on Friday. The Brent contract lost 4.43% over the week, with the spread between the Brent and the crude contracts standing at USD9.61 a barrel.
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