Crude oil re-approaches 6-week low in risk-off trade

Investing.com - Crude oil futures fell sharply during European morning hours on Monday, re-approaching last week’s six-week low as market sentiment was hit by global growth concerns as well as uncertainty over whether Spain will request a full scale sovereign bailout.
 
Oil prices have been under heavy selling pressure in recent sessions amid signs that top oil exporter Saudi Arabia was pumping more oil. The country’s output is near the highest level in more than three decades, according to a Persian Gulf official with knowledge.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD91.70 a barrel during European morning trade, dropping 1.3%.

Earlier in the session prices fell by as much as 1.4% to hit a daily low of USD91.61 a barrel, the weakest level since September 20, when prices tumbled to a six-week low of USD90.96 a barrel.

A recent rally spurred by a series of stimulus measures by major central banks around the world in a bid to bolster their economies appears to have faded, with investors shifting their focus back to concerns over the global economy.

New York-traded oil prices plunged 6% last week, amid growing concerns over the global economic outlook and the impact on future oil demand prospects.

Investors also remained cautious as Madrid is to present its draft budget for next year and announce structural reforms on Thursday, while the results of bank stress tests are due on Friday.

In addition, ratings agency Moody’s is expected to complete a ratings review on Spain later this week.

Over the weekend, Spain’s economy minister said the country would not rush to seek external financial aid, as pressure mounted on Spain to seek a bailout.

Greece also added to concerns, after German magazine Der Spiegel reported over the weekend that the country faces a EUR20 billion budget shortfall, almost twice as much as previously thought.

The risk-off trade environment prompted investors to pile in to the relative safety of the U.S. dollar, with the euro dropping to a seven-day low against the greenback.

The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, advanced 0.35% to trade at 79.72.

A stronger dollar makes U.S. commodities more expensive for importers holding other currencies such as yen or euro.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery tumbled 1.5% to trade at USD109.78 a barrel, with the spread between the Brent and crude contracts standing at USD18.08 a barrel.

London-traded Brent prices continued to come under pressure from recent comments made by Saudi Arabia, saying that the Kingdom was likely to keep output high in an effort to lower prices further weighed on the energy complex.

Analysts said that the market is now balancing Saudi assurances that it would make up for any supply shortfalls against the potential risk for the loss of oil from Iran amid tighter Western sanctions on Tehran over its disputed nuclear program.