Oil futures fell sharply yesterday as the euro zone crisis escalated, with anti-austerity demonstrators clashing with police in Athens and Madrid and news that Spain’s economy slowed further.
“It is ‘Risk Off’ today,” Olivier Jakob, energy analyst at Petromatrix in Zug, Switzerland, told Reuters. “The Greek strike and Spanish demonstrations are getting a lot of coverage.”
Developments in Europe overshadowed any bullish sentiment generated by data showing US crude inventories fell 2.45 million barrels last week.
Brent November crude fell $ 1.48 to $108.97 a barrel by 1631 GMT, after slumping to $ 108.45. Brent hit a six-week low of $ 107.10 hit last Thursday. US November crude was down $1.97 at $89.40 a barrel, below its 100-day moving average of $ 90.26. Wednesday’s session low of $ 88.95 was the lowest since prices fell to $87.23 on Aug. 3.
Commerzbank oil analyst Carsten Fritsch in Frankfurt told Reuters that investors were losing faith in the ability of the European Central Bank to hold the euro zone together.
“No solution is in sight for the euro zone crisis,” Fritsch said.
“It is impossible to make financial reforms in the face of such strong opposition from the people.”