Forex Pros – Crude oil prices fell sharply on Friday, dropping to a four-month low as ongoing fears over the euro zone’s debt crisis and concerns over a slowdown in demand from the U.S. drove prices lower.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD93.00 a barrel by close of trade on Friday, tumbling 5.85% on the week, the biggest weekly decline since early May.
It earlier fell to USD91.86 a barrel, the lowest price since February 21.
Hopes for a new Greek bailout package were raised on Friday after German Chancellor Angela Merkel dropped demands that bondholders should share the burden of a new bailout package for Greece.
But risk aversion remained heightened after ratings agency Moody’s said it was placing Italy’s sovereign rating under review for a possible downgrade, raising fears that the region’s debt crisis could spread to other euro zone member states.
Meanwhile, a string of disappointing U.S. economic data last week added to concerns over a slowdown in demand from the world’s largest crude consumer.
Official data showed on Thursday showed that manufacturing activity in the Philadelphia-region fell to the lowest since July 2009, while a report on Wednesday said that manufacturing activity in New York State unexpectedly contracted in June.
The American Petroleum Institute said on Friday that U.S. crude supplies rose to 367.6 million barrels in May, the highest level in 31-years, as refineries processed less crude amid a decline in gasoline demand.
U.S. consumption of distillate fuel, which includes diesel and heating oil, fell 5.2% last week to the lowest since January, according to the U.S. Energy Department
Global financial service provider BNP Paribas said in a report on Friday that, “We’ve wiped out half of the spring rally as oil demand growth has slowed in the second quarter with a weakening of the economic recovery.”
The lender added that it expected, “growth to pick up as we move into the fourth quarter.”
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery traded at USD113.26 a barrel by close of trade on Friday. The Brent contract fell sank 4% on the week and was up USD20.26 on its U.S. counterpart.
The spread between the two contracts rose to an all-time high of USD23.34 on Wednesday, when the July Brent contract expired. The two contracts historically have traded within USD1.00 of each other.
Barclays attributed the widening spread between the two contacts to “an oversupplied U.S. market.”