Brent falls below $112 on U.S. recession fears
Sep 5, 2011, 12:27 a.m.
By Christopher Johnson
LONDON (Reuters) - Brent crude oil fell toward $111 a barrel on Monday, as fears of another U.S. recession slowing fuel demand overshadowed concerns that a tropical storm may shut down some U.S. offshore oil production.
U.S. employment growth ground to a halt in August, reviving recession fears and piling pressure on President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.
Brent futures for October fell $1.38 to a low of $110.95 a barrel, and by 0710 GMT (3:10 a.m. ET) was trading around $111.00.
U.S. crude futures were down $1.45 at $85.00 a barrel, after settling $2.48 lower on Friday at $86.45. Volume was relatively light with U.S. markets closed for Labor Day.
"The macro situation is leading to fears of a double-dip recession. And there has been a recent trend of selling into strength when the market hits a soft patch," said Chen Xin Yi, a commodities analyst at Barclays Capital in Singapore.
Stock markets followed Wall Street lower on Monday, after the U.S. Labor Department said employers added no net new jobs last month and July's total was revised lower. <.EU>
Compounding fears of a recession in the United States, Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt crisis.
In China, the services sector grew in August at the lowest pace on record, a private survey showed, as new orders ebbed and tightening measures to rein in an exuberant property sector started to pinch.
A slowing economy raises the odds of another bond buying program, or quantitative easing, by the U.S. Federal Reserve, economists say. That could cheapen borrowing, weaken the dollar, and encourage investment in commodities.
"This is likely to bring further calls for quantitative easing, despite the Fed's apparent aversion," said CMC Markets market strategist Michael McCarthy in a research note.
Brent oil will fall further to $109.01 per barrel, while U.S. oil is also expected to fall more to $84.20 per barrel, according to Reuters market analyst Wang Tao.
Providing some support for prices was oil companies' shutdown of more than half the crude production in the U.S. Gulf of Mexico due to Tropical Storm Lee, which is hindering efforts to restaff and restart oil and gas platforms in the basin.
Lee reached Louisiana's coast early on Sunday, but was moving inland very slowly. High winds grounded helicopters on standby for oil and gas companies that would have otherwise ferried workers out to do post-storm assessments and restaff facilities.
Another storm, Hurricane Katia, intensified over the open Atlantic on Sunday, bulking up to a powerful Category 2 storm, the U.S. National Hurricane Center said.
The Miami-based hurricane center said it was still too soon to gauge the potential threat to land or to the U.S. East Coast with any certainty. But most computer models showed the storm veering on a northeast track out to sea after moving safely west of the mid-Atlantic island of Bermuda later this week.
The European Union imposed a ban on purchases of Syrian oil on Saturday and warned of further steps unless President Bashar al-Assad's government ended its crackdown on dissent.
In Libya, forces loyal to Muammar Gaddafi refused on Sunday to give up one of their last strongholds without a fight, raising the prospect of an assault on the town of Bani Walid.
The EU has lifted sanctions on Libyan ports and oil firms, but few expect the country's normal oil production -- around 1.6 million bpd -- to be restored soon, after a civil war halted its oil sector this year.
(Additional reporting by Francis Kan in Editing by Alison Birrane)
- When Bud Forrest created the stage show “In the Mood” 21 years ...
- One out of every six health care dollars is spent on treating ...
- In searching for investment options, would you rather have—high return or low ...
- In their early 70s, Koert and Rebecca Smith were looking to make ...
- At age 74, singer-songwriter Paul Williams is in better shape than he ...