Oil fell to the lowest in more than 10 months in New York and dipped below $100 a barrel in London as the U.S. credit-rating cut and rising stockpiles stoked concern a slowing economy will reduce demand for fuel.
Crude declined as Asian stocks dropped for a sixth day. U.S. equities slumped the most since December 2008 in the first trading session since Standard & Poor’s Aug. 5 downgrade. An Energy Department report tomorrow may show crude inventories climbed for a third week. Brent oil traded in London slipped below $100 for the first time since Feb. 8.
“Until we can see some confidence coming back to the U.S. consumer, the situation is probably not going to change that much in terms of another strong price rally,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who kept his forecast for New York crude to average $115 this year. “A recession would obviously have the potential to reduce consumption and that will place pressure on prices.”
Crude for September delivery fell as much as $5.60, or 6.9 percent, to $75.71 a barrel in electronic trading on the New York Mercantile Exchange, the lowest price since Sept. 29. It was at $79.71 at 8:49 a.m. London time. Prices have fallen 2.1 percent in the past year.
Brent oil for September settlement was down 88 cents at $102.86 a barrel after slipping as much as $5, or 4.8 percent, to $98.74 on the London-based ICE Futures Europe exchange. The European benchmark contract was at a $23.09 premium to U.S. futures, after earlier reaching an intraday record of $23.76.
New York futures have tumbled 30 percent since reaching a two-year high of $114.83 in intraday trading on May 2. Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options prices, was at 61.57 percent at 8 a.m. London time, up from 40.9 percent Aug. 5.
Federal Reserve policy makers will hold a one-day meeting today as the removal of the top credit rating for the U.S. stokes speculation the nation is headed for a recession. S&P said it downgraded the country one level to AA+ because the agreement by President Barack Obama and congressional Republicans didn’t do enough to stabilize the government’s “medium-term debt dynamics.”
“The way prices are falling, especially on stock exchanges, they are likely to keep falling until the Fed unveils some new program,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in an e-mailed note. “There are very few options available, but this is threatening to be a complete meltdown.”
The MSCI Asia Pacific Index slumped 1.4 percent at 3:52 p.m. in Tokyo, paring losses of as much as 5.5 percent. Euro Stoxx 50 futures slid 0.7 percent. S&P 500 Index futures rose 1.1 percent, following a 6.7 percent plunge in the gauge yesterday. The Standard & Poor’s Index fell 6.7 percent to 1,119.46 at the 4 p.m. close in New York, its lowest since September, as all 500 stocks fell for the first time since Bloomberg began tracking the data in 1996.
China’s inflation accelerated to the fastest pace in there years in July, restraining the government from easing monetary policy as risks to the global economy mount. Consumer prices climbed 6.5 percent from a year earlier, the Beijing-based National Bureau of Statistics said on its website today.
The Energy Department report tomorrow may show crude oil supplies increased 1.5 million barrels in the seven days ended Aug. 5 as the government released barrels from the Strategic Petroleum Reserve, according to the median of eight analyst estimates in a Bloomberg News survey. Gasoline inventories probably climbed 900,000 barrels, the survey shows.