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Oil hits new low for year as eurozone debt weighs

SINGAPORE, May 19 – Oil prices tumbled to a new low for the year in Asian trade Wednesday due to a stronger dollar and persistent concerns about the eurozone debt crisis, analysts said.

New York\’s main contract, light sweet crude for delivery in June, dipped to an intra-day low of 67.90 dollars a barrel before recovering to 68.19 dollars in afternoon trade, down 1.22 dollars from the previous day\’s close.

London\’s Brent North Sea crude for July delivery dropped 36 cents to 74.07 dollars.

Weaker equities and risk aversion prompted the oil price slump as the euro fell to a new four-year low against the greenback on Wednesday.

"The ongoing concerns over the European debt are still very much lingering in the minds of every investor," Serene Lim, a Singapore-based oil and gas analyst with ANZ bank, told AFP.

"As such, the dollar has increased and that has also weighed on oil prices."

A stronger US currency makes dollar-priced oil more expensive for holders of weaker currency units, denting demand and pushing prices lower.

The single European currency has remained feeble even after eurozone finance ministers put together a rescue package for the region.

Investors remain worried that austerity measures announced by Greece and other debt-laden eurozone countries could hurt growth and consumption in Europe, weighing on energy demand.

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Lim said oil prices were likely to fall further if crude stockpiles in the United States, the world\’s biggest economy and largest energy consumer, continued rising. Rising stockpiles indicate weak demand.

"We are also not seeing a lot of crude (oil) fundamentals trying to support the prices. So unless we see the… demand increase substantially I think concerns on the Europe side will continue to weigh on the price," Lim said.

The US Department of Energy said last week that crude stockpiles for the week ended May 7 had risen 1.9 million barrels, more than double the amount forecast by analysts.

The DoE will release its latest inventories report later Wednesday.

 

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