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News // Markets & Stocks

Oil prices have fallen to $71

06 July 2010 , 08:58Reuters1905

 

Oil extended losses on Tuesday to four-week lows near $71, down as much as 1.5 percent from Friday's close, after a raft of negative economic indicators over the past week undermined confidence about growth in energy use. Global services growth slowed in June, data showed on Monday, a further sign that emerging and developed economies are set to cool off through the second half of the year. The services data from China and Europe came days after weak manufacturing statistics from major economies including China. Concern about the health of European banks and about a potential double-dip recession also fanned risk aversion, sending the dollar higher on Tuesday and making commodities denominated in the U.S. currency more expensive for Asian buyers. U.S. light, sweet crude fell as much as $1.05 to $71.09 a barrel and was down 65 cents at $71.49 in Asia.

 

New York Mercantile Exchange (NYMEX), which was trading only electronically Monday, will combine Monday's and Tuesday's trading sessions because of the U.S. holiday, with a single settlement price issued on July 6. "The market mood is very bad as people try to look for bearish data all over the world and liquidity is low due to the U.S. holiday," said Keichi Sano, general manager of research at SCM Securities in Tokyo. "The economic recovery is even slower than most people expected. Everything is going down and that reflects the weaker Chinese economy." London Brent crude slid 31 cents to $71.16 a barrel, posting a smaller decline than U.S. crude after Monday's settlement price already accounted for part of Tuesday's drop in NYMEX crude. S&P 500 futures fell more than 1 percent on Tuesday, before paring losses. The drop in futures helped push Japan's benchmark Nikkei down 1.5 percent, while the dollar gained almost 0.2 percent against a basket of currencies.

 

China's services sector growth slowed to its weakest in 15 months in June and the surveys showed a similar slowdown from heady rates across Europe, where governments are taking the hatchet to budgets and where consumer spending is already lackluster. Traders were looking to Tuesday's release of U.S. non-manufacturing PMI data for June for further indications about the direction of the economy. Top oil exporter Saudi Arabia cut the August official selling price (OSP) for its Arab Heavy crude oil grade to Asia, in line with expectations in a Reuters poll. A weather system located between Mexico's Yucatan peninsula and western Cuba had a 30 percent chance of developing over the next two days into a tropical cyclone, a category that includes tropical storms and hurricanes, the U.S. National Hurricane Center said late on Monday. The system's location and expected course are similar to those Hurricane Alex followed in its formation late in June, before moving into the Gulf of Mexico, forcing Mexican oil terminals to shut and U.S. producers to curb output. 

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