Forexpros – Crude oil futures fell to a six-week low on Friday, settling below the psychologically-important USD80-a-barrel level as mounting concerns over the outlook for global economic growth prompted investors to dump riskier assets.
On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD79.98 a barrel by close of trade on Friday, plunging 8.85% over the week, its biggest weekly drop since early May.
The November contract fell by as much as 3.55% on Friday to hit USD77.54 a barrel, the lowest price since August 9, before paring losses after financial leaders from the Group of 20 nations said they would take “all steps necessary” to calm the global financial system.
On Thursday, crude prices plunged nearly 5.5% after the Federal Reserve warned of “significant downside risks” facing the U.S. economy on Wednesday and announced fresh measures to boost growth.
The Fed unveiled a plan to trade short-term bonds for long-term ones, in an attempt to boost the economy by pushing down long-term interest rates, a move dubbed “Operation Twist.”
Adding to global worries, a preliminary reading of the HSBC China purchasing managers’ index fell to a two-month low of 49.4 in September, while a separate report showed that manufacturing activity in the euro zone slumped to the lowest since August 2009 in September.
The U.S. and China are the world’s two largest oil consuming nations and manufacturing numbers are used as indicators for fuel demand growth.
The grim global growth outlook prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the greenback.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gained 1.6% over the week to settle close to a ten-month high of 78.92 by close of trade Friday.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery traded at USD103.78 a barrel by close of trade on Friday. The Brent contract fell 7.2% over the week, with the spread between the Brent and the crude contracts narrowing to USD23.80 a barrel.
Despite the recent pullback in prices, Wall Street lender JP Morgan maintained its Brent forecast of USD115 a barrel for 2012, citing the prospect of supply curbs by OPEC producers to prop up prices.
“As long as producers are prepared to trim output back to mid-2010 levels, we believe that Brent is likely to remain in a USD100 to USD120 per barrel range,” the bank said in a report.
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