Investing.com - Crude oil futures edged lower to trade near a seven-month low during European morning hours on Wednesday, pressured by growing fears over Spain's deteriorating financial situation and dashed hopes of aggressive stimulus action by China.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD89.83 a barrel during European morning trade, dropping 1.05%.
It earlier fell by as much as 1.15% to trade at USD89.77 a barrel, the lowest since May 23, when prices touched a seven-month low of USD89.28 a barrel.
Oil’s losses came amid growing concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession-hit economy fuelled fears that Madrid will be forced to seek an international bailout.
The yield on Spanish 10-year bonds climbed to their highest level so far this year on Tuesday, approaching the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
Late Tuesday, ratings agency Egan-Jones downgraded Spain's sovereign rating for the third time in less than a month, citing concerns over elevated government debt levels.
Jitters regarding Spain have worsened in recent sessions, after Bankia, the country’s fourth-largest lender, said it needed EUR19 billion in state aid to shield itself from bad loans last Friday.
The Spanish banking sector suffered another blow after the European Central Bank signaled opposition to any attempt to fund Bankia’s recapitalization through the central bank's lending facilities.
Meanwhile, Bank of Spain Governor Miguel Angel Fernandez Ordonez resigned late Tuesday, a month earlier than expected amid criticism over the handling of Spain’s debt woes.
There are worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil. The euro zone accounted for nearly 12% of global oil consumption in 2010, according to data from British Petroleum.
Oil prices came under further pressure as hopes for a large Chinese stimulus package were dashed after the official Xinhua News Agency reported Tuesday that China has no plans to “roll out another massive stimulus plan to seek high economic growth” like it did in 2008.
In 2008, policy makers unveiled a fiscal stimulus of CNY4 trillion.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Oil traders were looking ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles rose by 0.5 million barrels last week to the highest level since 1990, underscoring fears over a slowdown in oil demand from the U.S.
The report comes out a day later than usual due to the U.S. Memorial Day holiday on Monday.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
NYMEX crude prices are off almost 16% in May and have fallen nearly 19% since hitting a March 1 intraday peak of USD110.53 a barrel, as concerns lingered over a widening global economic slowdown and as tensions have eased between Iran and Western nations over the country’s nuclear program.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery fell 0.7% to trade at 105.94 a barrel, with the spread between the Brent and crude contracts standing at USD16.11.
Brent crude, the European benchmark, is nearly 17% off its intraday high of USD128.38 hit on March 1.
A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.
But revived talks between Iran and major powers over Tehran's nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD89.83 a barrel during European morning trade, dropping 1.05%.
It earlier fell by as much as 1.15% to trade at USD89.77 a barrel, the lowest since May 23, when prices touched a seven-month low of USD89.28 a barrel.
Oil’s losses came amid growing concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession-hit economy fuelled fears that Madrid will be forced to seek an international bailout.
The yield on Spanish 10-year bonds climbed to their highest level so far this year on Tuesday, approaching the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.
Late Tuesday, ratings agency Egan-Jones downgraded Spain's sovereign rating for the third time in less than a month, citing concerns over elevated government debt levels.
Jitters regarding Spain have worsened in recent sessions, after Bankia, the country’s fourth-largest lender, said it needed EUR19 billion in state aid to shield itself from bad loans last Friday.
The Spanish banking sector suffered another blow after the European Central Bank signaled opposition to any attempt to fund Bankia’s recapitalization through the central bank's lending facilities.
Meanwhile, Bank of Spain Governor Miguel Angel Fernandez Ordonez resigned late Tuesday, a month earlier than expected amid criticism over the handling of Spain’s debt woes.
There are worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil. The euro zone accounted for nearly 12% of global oil consumption in 2010, according to data from British Petroleum.
Oil prices came under further pressure as hopes for a large Chinese stimulus package were dashed after the official Xinhua News Agency reported Tuesday that China has no plans to “roll out another massive stimulus plan to seek high economic growth” like it did in 2008.
In 2008, policy makers unveiled a fiscal stimulus of CNY4 trillion.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Oil traders were looking ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Thursday’s government report could show crude stockpiles rose by 0.5 million barrels last week to the highest level since 1990, underscoring fears over a slowdown in oil demand from the U.S.
The report comes out a day later than usual due to the U.S. Memorial Day holiday on Monday.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
NYMEX crude prices are off almost 16% in May and have fallen nearly 19% since hitting a March 1 intraday peak of USD110.53 a barrel, as concerns lingered over a widening global economic slowdown and as tensions have eased between Iran and Western nations over the country’s nuclear program.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery fell 0.7% to trade at 105.94 a barrel, with the spread between the Brent and crude contracts standing at USD16.11.
Brent crude, the European benchmark, is nearly 17% off its intraday high of USD128.38 hit on March 1.
A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.
But revived talks between Iran and major powers over Tehran's nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.