Forexpros – Crude oil futures fell to the lowest level in three weeks on Friday, settling below the USD100-a-barrel mark as appetite for riskier assets was weighed after ratings agency Standard and Poor’s downgraded the sovereign credit ratings of nine euro zone countries, including France.
On the New York Mercantile Exchange, light sweet crude futures for delivery in February traded at USD99.31 a barrel by close of trade on Friday, retreating 2.15% over the week.
Prices fell to a three-week low of USD97.70 a barrel earlier Friday after S&P stripped France and Austria of their coveted triple-A ratings and slashed Italy, Spain, Portugal and Cyprus by two notches.
Malta, Slovakia and Slovenia were downgraded by one notch, while Germany, Finland, Luxembourg, and the Netherlands kept their triple-A ratings.
Meanwhile, talks aimed at negotiating a restructuring of Greece’s debts broke down on Friday, amid disagreements over how much money investors will lose by swapping their bonds, raising fears over a possible default.
The news prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the U.S. dollar.
The euro dropped to a 16-month low against the greenback, while the dollar index gained 0.82% to settle at 81.72 by close of trade Friday, the highest level since September 2010.
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.
Oil prices came under pressure on Thursday after reports surfaced late in the day that a pending European Union embargo on Iranian oil imports could be delayed by six months to allow some countries to find alternative supply.
Foreign ministers from the 27 European Union member states are scheduled to decide on sanctions on January 23 in Brussels.
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2010. The threat of a major supply disruption from the country has helped support oil prices in recent sessions.
Meanwhile, in Nigeria, protests by union workers over the government’s plan to end fuel subsidies were reportedly suspended as discussions between the two sides continued.
Nigeria is Africa’s largest oil producer, priding nearly 2.0 million barrels per day, with exports going largely to the U.S. and Europe.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery settled at USD110.96 a barrel by close of trade on Friday. The Brent contract lost 2.2% over the week, with the spread between the Brent and the crude contracts standing at USD11.65 a barrel.
In the week ahead, investors will be keeping a close eye on developments in the euro zone, amid concerns over the increased risk of sovereign debt contagion.
Markets will also continue monitoring tensions between Iran and the West as well as developments in Nigeria. Two major labor unions in the African nation said earlier Sunday that a nationwide strike will resume Monday after negotiations with the government failed over the weekend.
NYMEX floor trading will be closed on Monday, January 16 for the Martin Luther King Jr. holiday.
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