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Oil falls to $70 on global economy concerns

business Updated: May 21, 2010 11:09 IST

AP
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Oil prices fell to near $70 a barrel Friday in Asia on investor concern that a financial crisis in Europe could undermine the global economic recovery and crude demand. Benchmark crude for July delivery was down 50 cents to $70.30 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The July contract lost $1.68 to settle at $70.80 a barrel Thursday.

The June contract, which expired Thursday, lost $1.86 to settle at $68.01 a barrel on the Nymex.

Prices tumbled as low as $64.24 earlier in the day, the lowest price for oil since July. Crude has fallen about 20 per cent so far this month after touching an 18-month high of $87.15 on May 3 as investor confidence tumbled amid fears deep government spending cuts in Greece, Spain, Italy and Portugal to stave off a debt default will hurt European economic growth.

"This collapse came without much warning in the oil markets," Cameron Hanover said in a report. "There are signs that the economy may not be as strong as initially believed."

Oil had plunged to $32 a barrel in December 2008 from $147 five months earlier as a US financial crisis plunged the global economy into recession.

"The euro-zone's problems are a painful reminder that the global financial crisis has only been partly resolved by transferring it from the banking sector to the public finances," Capital Economics said in a report. "It would be wrong to assume that commodity prices will recover to their immediate pre-crisis levels as if nothing had happened in the meantime."

Capital Economics said it expects crude prices to fall to $60 a barrel at the end of the year.

In other Nymex trading in June contracts, heating oil fell 0.55 cent to $1.8969 a gallon, and gasoline dropped 2.00 cents to $1.9445 a gallon. Natural gas was steady at $4.099 per 1,000 cubic feet. In London, Brent crude July contact was down 52 cents to $71.32 on the ICE futures exchange.