Forexpros – Crude oil futures retreated during U.S. morning hours on Monday, giving back some of the previous session’s strong gains as concerns over the global economic outlook and uncertainty over new measures to tackle the euro zone’s debt crisis weighed on market sentiment.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD83.64 a barrel during U.S. morning trade, dropping 1.55%.
It earlier fell by as much as 1.85% to trade at a session low of USD83.18 a barrel. Prices hit USD85.30 a barrel on Friday, the highest since June 18.
Oil futures surged 9.4% on Friday, the largest one-day gain since March 2009 after European leaders agreed to use the euro zone’s bailout funds to support struggling banks directly, without adding to national debt, and to purchase government debt in order to keep borrowing costs down.
Leaders also agreed to set up a joint banking supervisory body for the euro area.
But market sentiment cooled on Monday amid questions over the long-term effectiveness of the measures in addressing the root causes of the euro zone’s debt crisis and uncertainty over how and when the measures can be implemented.
Earlier Monday, Finland and the Netherland’s reiterated their opposition to using euro zone bailout funds to purchase government bonds.
Meanwhile, concerns over the global economic outlook and its implications on demand prospects further weighed.
Fears over the outlook for the euro zone economy re-emerged after official data showed that the unemployment rate in the bloc rose to a record high 11.1% in May, up from 11.0% in April.
A separate report showed that the final reading of the euro zone manufacturing purchasing managers’ index came in at 45.1 in June, above the preliminary estimate of 44.8 and holding steady at its lowest level since June 2009.
The gloomy data came after official data showed that Chinese manufacturing activity grew at its slowest pace in seven months in June, as new export orders tumbled to lows hit in March 2009.
The rival HSBC PMI, which focuses more on small and medium-sized companies, inched up to 48.2 in June from 48.1 in May, indicating contraction for the eighth consecutive month.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of the euro zone’s debt crisis.
Oil’s losses were limited as prices found mild support ahead the start of a European Union oil embargo on imports from Iran, which started on July 1.
A potential loss of Iranian oil supplies helped underpin strong gains in oil prices during late last year and the first quarter of this year.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery shed 1.4% to trade at 96.41 a barrel, with the spread between the Brent and crude contracts standing at USD12.77.
Brent prices were supported by concerns over a disruption to supplies from Norway, the world’s eighth largest oil exporter.
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