Oil prices slump after massive US market dive

Oil prices slump after massive US market diveOil prices dropped for the third straight day in New York on Thursday, amid continuing worries about the stability of the eurozone and a stunning sell-off in the US financial markets.

Crude futures had nudged higher earlier in the day but headed south as the euro dropped under 1.27 dollars, reaching the lowest level since March 2009.

New York’s main contract, light sweet crude for delivery in June, closed down 2.86 dollars to 77.11 dollars a barrel. Over the last three trading sessions, it has fallen 10.5 percent.

Brent North Sea crude for June slumped by 2.78 dollars to 79.83 dollars in London.

“Crude oil prices struggled… as the euro extended losses to hit a 14-month low against the dollar,” said Sucden Financial Research analyst Myrto Sokou.

“The strengthening US dollar… dampened investors’ sentiment.”

A stronger US unit makes dollar-denominated oil more expensive for holders of rival currencies, such as the euro.

Risk-averse investors on Thursday continued to dump the European currency in favor of the dollar, which is seen as a safe haven asset during financial turmoil.

“We continue to expect the euro to decline further in the short to medium term,” said Dariusz Kowalczyk, chief investment strategist with SJS Markets.

He said commodities including crude were “hit by risk aversion and the dollar’s strength.”

The euro fell to the lowest level against the dollar for more than one year on Thursday as deadly protests in debt-plagued Greece cast a shadow over the future of the eurozone and the single currency, dealers said.

The shared European unit hit 1.2654 dollars, a level last seen on March 11 last year.

Oil prices slump after massive US market diveOil prices, meanwhile, have slumped since Monday when they touched 87.15 dollars — the highest level since October 2008.

The market was also being weighed down by rising oil inventories in the United States, indicating weakening demand in the world’s largest energy consuming nation.

Data released on Wednesday by the US Department of Energy showed crude stockpiles soared by 2.8 million barrels last week.

That was far greater than market expectations for a gain of around 700,000 barrels, according to analysts.

Elsewhere on Thursday, coastal residents anxiously awaited the outcome of efforts to contain the Gulf of Mexico oil spill with a giant dome-like structure and to limit damage from what is becoming an environmental catastrophe.

The Deepwater Horizon oil rig, operated by British energy firm BP and owned by US contractor Transocean, sank on April 22 — two days after a massive explosion killed 11 workers.