LONDON: Oil fell below $68 a barrel on Thursday to its lowest in nearly eight months, under pressure from concern that the euro zone debt crisis will cut both risk appetite and demand for oil.
Worries that the Greek fiscal problems could spill over to other economies has knocked oil prices down by around $20 from the $87.15 a barrel peak in early May.
Oil extended early losses on Thursday as US stocks dropped following a slew of data that raised doubts about the speed of economic recovery in the world’s top oil consumer.
Weekly initial US jobless claims rose unexpectedly and an April index of US leading economic indicators marked its first decline in over a year.
US crude for June delivery fell $2.14 to $67.73 a barrel by 1428 GMT in volatile trade on the day of its expiry, falling below the near eight-month low hit the previous day.
The June contract has fallen so far in eight out of the last 10 trading sessions.
The July contract was down $2.90 at $69.58 a barrel in the more volatile trade that usually characterizes more distant futures contracts relative to the benchmark front month.
ICE Brent futures were down $3.33 at $70.36 a barrel by the same time.
"The fiscal crisis in Europe has been an eye-opener for markets. Even though we have a recovery, it’s clear that it will be slow and painful and it’s the same for oil demand," said Christophe Barret, oil analyst at Credit Agricole CIB.
The euro traded near four-year lows against the dollar on Thursday as uncertainty over unity in the euro zone prevailed following Germany’s solitary move to ban naked short-selling of certain bonds, stocks and credit protection on Wednesday.
Oil prices tend to fall when the euro falls against the greenback as this makes dollar-denominated commodities more expensive for holders of the single European currency.
The German ban has also curbed buying appetite for commodities such as oil as investors fret other eurozone members will follow suit, which is exacerbating the price slide, analysts said.
Oil prices this week have fallen below the $70-$80 a barrel range that many members of the Organization of the Petroleum Exporting Countries (OPEC) have said is fair for both producers and consumers.
But OPEC officials have stopped short of calling for any immediate steps to prop up the market.
Some analysts attribute the weakness of US crude partly to a regional supply glut at the Cushing delivery point for West Texas Intermediate (WTI) where stocks are at a record high of 37.9 million barrels.
The sell-off in the alternative global oil benchmark ICE Brent has been less pronounced than on WTI and the spread between the two contracts was around $3 on Thursday, with Brent at a premium.
Oil prices briefly rallied on Wednesday after US weekly inventory data showed a smaller-than-expected 200,000 barrel rise in crude stocks.
The data also showed a surprise decline in distillates and a smaller than forecast drop in gasoline, stirring hopes that fuel demand in the number one oil consumer is improving.
Oil demand is historically weakest in the second quarter between the northern hemisphere winter heating oil season and the summer gasoline season. –Additional reporting by Judy Hua in Singapore
