New York (AFP) – Crude oil prices fell Tuesday as investors fretted about tepid economic growth in the United States and mounting tensions between China and Japan.
New York’s main contract, West Texas Intermediate (WTI) or light sweet crude for October, dropped $1.33 from Monday, to $95.29 a barrel.
Brent North Sea crude for delivery in November slid $1.76 to settle at $112.03 a barrel.
With the euphoria from last Thursday’s Federal Reserve announcement of fresh stimulus grown cold, investors focused on the reason for the need for central bank support: a slowing, sluggish US economy mired in high unemployment.
Tuesday’s oil price slump followed a mysterious plunge in late-session New York trade on Monday that left analysts baffled.
That prices didn’t rebound right away showed that the market looked at the sudden dive “as potentially a little bit of a shift lower,” said David Bouckhout at TD Securities.
“The sudden sharp decline in crude oil prices late last night in New York remains a mystery today,” said CMC Markets analyst Michael Hewson.
“However, the fact is that a slowing growth outlook is never a particularly good environment for crude prices, given that a rise in prices merely exacerbates economic problems.
“For that reason the decision to embark on unlimited bond purchases remains a risky one on the part of the Federal Reserve.”
A growing dispute between China, the world’s biggest energy consumer, and Japan, the third-largest economy, over islands in the East China Sea also rattled the oil markets.
“The concern for oil traders is the potential damage to Chinese-Japanese trade and its impact on oil demand,” said Phil Flynn of The Price Futures Group.
“The worry is that an escalation could weaken the demand for oil. It could lead to safe-haven buying in the dollar and bonds and cause a flight away from the euro,” he said.
