Brent crude prices fell below $97 a barrel to a 16-month low on Monday, as weak US and Chinese economic data fanned renewed fears of a global economic slowdown, which would hit oil demand.
Brent crude for July delivery dropped more than $1 to an intraday low of $96.67, its lowest since January 2011. US crude fell $1.60 to $81.63 a barrel after tumbling as low as $81.50 earlier in the session, its lowest level since last October.
"The market is digesting all the bad data that came out last week," said Tony Nunan, a Tokyo-based risk manager at Mitsubishi Corp. "Brent at $100 was a strong psychological support and we just blew through that. So now I think people will be taking their money out of risky assets because everybody is afraid to pick a bottom."
Data on Friday showed US job growth stumbling in May, causing the country's unemployment rate to rise for the first time in nearly a year. China added to the gloom with a report of a slowdown in manufacturing.
The poor economic data also hit equity markets on Monday, pushing Tokyo's Topix index to a 28-year low of 693.26 while S&P 500 futures fell 0.7 per cent, indicating yet more selling when investors wake up in North America.
"If we see more equity market tumbles over coming sessions, crude oil may be looking at having a tenure below $80 per barrel before the week is out," said Tim Waterer, senior trader at CMC Markets.
Stealing the spotlight
Economic worries and decades-high crude production from OPEC power Saudi Arabia have overshadowed a possible disruption of Iranian supplies due to Western sanctions against Tehran. In May, both Brent and US crude posted their biggest monthly losses since late 2008.
"With maximum production out of OPEC and global inventories built up, we are not likely to get a shortage situation," said Victor Shum, senior partner at oil consultancy Purvin & Gertz. "Saudi Arabia has definitely prepared for the possible loss of Iranian supplies."
Investors also remained cautious over the escalating financial turmoil in Europe.
Spanish Prime Minister Mariano Rajoy on Saturday called for the establishment of a central authority to oversee and coordinate euro zone fiscal policy. Germany also wants a big leap forward in euro integration, but investors doubt the closer ties could restore market confidence.
Traders are closely watching several monetary policy meetings due this week, including those of the European Central Bank on Wednesday and the Bank of England on Thursday, for clues on their responses to vulnerable global growth.
US Federal Reserve chairman Ben Bernanke will testify on Thursday before a congressional panel about the state of the US economy.
Copyright: Thomson Reuters 2012
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