Oil tumbles below $78 amid US recession fears

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Oil tumbles below $78 amid US recession fears

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Oil prices tumbled to their lowest in almost a year to below $78 a barrel Tuesday in Asia.

09 August,2011 11:28 am

The Oil prices tumbled to their lowest in almost a year to below $78 a barrel Tuesday in Asia amid a global sell-off of equities and commodities triggered by investor fears the U.S. will soon fall into recession.Benchmark oil for September delivery was down $3.48 to $77.83 a barrel, the lowest since September 2010, at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude fell $5.57, or 6.4 percent, to settle at $81.31 on Monday.In London, Brent crude was down $4.68 at $99.06 per barrel on the ICE Futures exchange.A downgrade of U.S. debt one notch from AAA to AA by Standard & Poors announced Friday sparked investor panic this week. Oil traders often look to equities as a barometer of overall investor confidence, and Monday the Dow Jones industrials plunged 634.76 points, or 5.6 percent, the sixth-worst point decline for the Dow in the last 112 years.Asian stocks opened Tuesday sharply lower. Its clear were entering, or are on the precipice of, another global financial crisis, said Richard Soultanian, an analyst with NUS Consulting. Soultanian expects crude to fall to between $55 and $60 before rebounding to the mid-$70s in the fourth quarter.Investors will be closely watching the latest consumption forecasts from OPEC and the Department of Energy scheduled to be released later Tuesday. Traders will also be looking to the U.S. Federal Reserve to calm markets and possibly announce another round of monetary stimulus.The Fed has already twice implemented a program of Treasury bond purchases, known as quantitative easing, since the 2008 financial crisis.Some analysts argue strong crude demand from developing countries such as China should help stabilize oil prices. Most companies and consumers have less debt than two years ago, which should help lower the risk of global economic growth slowing sharply, energy analyst and trader Blue Ocean Brokerage said.In other Nymex trading in September contracts, heating oil fell 4.1 cents to $2.76 a gallon while gasoline dropped 5.1 cents at $2.64 a gallon. Natural gas futures slid 2.1 cents at $3.91 per 1,000 cubic feet.