LONDON: US oil prices fell below $70 a barrel on Monday to their lowest in over three months, extending a loss of more than 17 percent so far in May on concerns over Europe’s debts, the weak euro and swollen US oil inventories.
US oil futures hit a 19-month high above $87 on May 3 but have fallen steadily since then and hit a low of $69.82 a barrel on Monday, their weakest since Feb 5, before recovering much of the day’s 2.5 percent loss at the session lowpoint.
The euro slid to a four-year low on Monday on persistent euro zone sovereign debt worries and fears belt-tightening measures would hurt growth in the region. Base metals dropped to three-month lows as investors shunned riskier assets and on doubts over the prospects for global growth.
Investors moved into safer havens such as bullion with spot gold in sight of record highs.
"It is not surprising that prices have recovered after such sharp falls," said Eugen Weinberg, analyst at Commerzbank in Frankfurt.
US crude for June delivery was down 34 cents at $71.27 by 1328 GMT. At its intra-day low of $69.82, oil was down almost exactly 20 percent from its peak two weeks ago.
July Brent crude fell 40 cents to $77.53 a barrel.
So far in May, the US crude contract has lost around 17 percent, its biggest monthly drop since December 2008. The contract is expected to face volatility ahead of Monday’s June crude options expiry and the May 20 June crude contract expiry.
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract’s West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record high 37 million barrels, pushing front-month US crude down relative to later futures contracts and the other global crude benchmark, Brent.
Brokers MF Global expressed concern for the outlook for oil and some other commodities and cited an analysis of fund flows suggesting that while precious metals could outperform, "crude oil, copper, and aluminum could be relatively vulnerable".
Members of the Organization of the Petroleum Exporting Countries have said they think oil prices should be between $70 and $80, a range they say is fair for both consumers and producers, and recent price falls are worrying OPEC countries.
Kuwaiti Oil Minister Sheikh Ahmad Al-Abdullah al-Sabah said last week OPEC was likely to meet if crude prices fell sharply.
"Sixty-five dollars would ring a bell … and a meeting," he told reporters before an Arab Energy Conference.
But some traders believe such comments may be dangerous. MF Global said OPEC may just be giving the oil market a target.
"OPEC seems to be nonplussed by the recent decline, saying that it would not consider meeting until prices get to $65," MF Global said in a note to clients. "This effectively sets up a downside target that the markets will conceivably gun for, and one that is not outside the realm of possibility."
Iraq’s oil minister said on Monday OPEC did not need to meet to discuss output levels because oil markets were balanced.
"The market is not oversupplied, there is balance between supply, OPEC production, and demand," Iraqi Oil Minister Hussain Al-Shahristani told reporters.
Japan’s Nikkei shed 2.2 percent on Monday, falling with other Asian markets, but European stocks rose.
The dollar gained 0.2 percent against a basket of currencies. A strong US currency makes dollar-denominated commodities, such as oil, more costly for holders of other currencies and tends to dampen prices. –Additional reporting by Judy Hua in Singapore
