U.S. oil plummets 6.4 pct on S&P downgrade
U.S. crude oil price plummeted 6.4 percent on Monday to settle at the lowest level since November as fears spread after S&P slashed U.S. credit rating from AAA to AA+ last Friday, Xinhua reported.
Following the sharp declines of stocks market, the crude markets saw free fall. The crude investors were obviously terrified by the results that the U.S. lost its top rank rating for the first time in history and fell into panic sell-off reaction. They shrugged off the help pledged by European Central Bank to debt-burdened Italy and the soothing comprise from Group of Seven Nations (G7) over the weekend.
Analysts said that financial markets are losing confidence to the U.S. economy. Concerns about a double-dip recession in U.S. were mounting after the downgrade and triggered the sell-off.
Light, sweet crude for Sept. delivery tumbled 5.57 dollars, or 6.41 percent to 81.31 dollars a barrel on the New York Mercantile Exchange.
In London, Brent crude for Sept. delivery plunged over 5 percent and last traded around 104 dollars a barrel, breaking through the 200-day moving average.
Risk aversion increased. Money fled into safe havens, piling into spot gold and pushing the gold price to a new record high of over 1700 dollars an ounce.
Goldman Sachs said on Monday that it maintained "overweight" recommendation on commodities and oil relative to other assets, although it added that risk to its constructive commodity views had risen.
"We believe that WTI crude oil prices could briefly drop to 50 dollars under a recession scenario," Merrill Lynch said in a note, but it maintained its 2012 average forecast for U.S. crude at 102 dollars a barrel and its forecast for Brent next year at 114 dollars a barrel.