Crude oil prices dropped sharply yesterday, losing more than $1 a barrel, in a market driven by stock market declines and concerns about the world economy.
Light, sweet crude for April delivery fell by $1.12 to $60.52 a barrel in electronic trading on the New York Mercantile Exchange at midday in Europe. Brent crude for April fell by $1.02 to $61.06 a barrel on the ICE Futures exchange in London.
"There's a general sort of recoil from risk in the market," said Tobin Gorey, a commodity strategist with the Commonwealth Bank of Australia in Sydney.
"There are still ongoing ramifications from China's drop last Tuesday," Gorey said, noting that most Asian equity markets were also down yesterday. "It was a jolt to the global economy."
Last Tuesday, the benchmark Shanghai Composite Index plunged nine per cent, triggering huge losses on Wall Street and other markets.
The oil market still closed at a two-month high on Thursday on the news of tightening gasoline supplies, but afterward followed the stock market's downward pull.
Jan Stuart, an analyst at UBS in London, said fundamentals for oil remained good, with strong US oil demand, low imports and reduced refiner supply.
"Far below consensus non- OPEC growth, and demand strength from outside North America" were other supporting factors, Stuart said.
Last week's U.S. inventories report showed stockpiles of gasoline and distillates, which include heating oil and diesel fuel, dropped by a larger amount than analysts had forecast.
Meanwhile, demand for products over the last four-week period rose by 7.5 per cent from the same period last year.
Heating oil futures fell 2.28 cents to $1.7454 a gallon on the Nymex, while natural gas rose 2.2 cents to $7.221 per 1,000 cubic feet.
Tension between Iran and the United States also remains a bullish factor.
Washington is pushing for tougher U.N. sanctions on Tehran over its failure to comply with demands to halt its uranium enrichment programme.
Although the United States has said it has no plans for a military strike, the option has not been ruled out.
Source - Assoicated Press