US crude oil fell more than USD 2 and Brent crude lost over USD 1 per barrel on worries over the prospects for global economic growth as debt crises dominated headlines on both sides of the Atlantic.
A US congressional committee looked set to fail in a bid to cut at least USD 1.2 trillion from the US deficit over the next 10 years. While the group had until midnight on Wednesday to bridge differences over taxes and spending, comments from congressional aides suggested it would admit defeat on Monday.
In Europe, German bonds rose and peripheral euro zone debt came under renewed pressure as investors fled risky assets and headed for safer havens. US crude oil futures for January delivery on the New York Mercantile Exchange tumbled USD 2.06 to a low of USD 95.61 per barrel before recovering slightly to around USD 98.80. The drop pared this month's gain to around 3% after an 18% jump in October.
Mr Eugen Weinberg head of global commodities research at Commerzbank in Frankfurt said that "Concerns about US debt have added to risk aversion. The euro zone crisis is ongoing with no sign of being resolved and equities are down very sharply."
European stocks dropped to 6 week low early on Monday, extending losses after Moody's said a rise in interest rates on French government debt and weaker economic growth prospects could be negative for France's credit rating.
Investors concerned over slowing euro zone growth and its 2 year old debt crisis have fled to dollar holdings in recent weeks but analysts expect the US currency to suffer too if Congress fails to agree cuts to government spending.
Brent's decline was limited by concern that tension over Iran's nuclear program and clashes in Egypt and Syria may disrupt Middle Eastern output as demand for fuel rises ahead of the Northern Hemisphere winter.
Mr James Zhang an analyst with Standard Bank in London said that "WTI remains a more actively traded contract than Brent. When the oil market is swung by macro-events, the volatility in WTI tends to be higher."
The US plans to sanction Iran's petrochemical industry, sources familiar with the matter said last week seeking to raise pressure on Tehran after fresh allegations it may be pursuing nuclear weapons.
Mr Bashar al Assad president of Syria vowed to continue a crackdown against protests demanding an end to more than four decades of rule by his family, a move likely to step up international pressure on the oil producing nation and that may result in sanctions from other Arab states.
In Egypt, at least 12 people were killed in clashes between security forces and crowds protesting against the ruling military council in some of the worst violence since the overthrow of Hosni Mubarak.
(Sourced from Reuters)
