Oil prices edged further below $93 a barrel on Thursday, extending a sharp two-week sell-off, as traders monitored Europe’s debt crisis and its potential impact on global growth.
By early afternoon in Europe, benchmark oil for June delivery was down 4 cents to $92.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.17 to settle at $92.81 in New York on Wednesday.
In London, Brent crude for July delivery was down 48 cents at $109.27 per barrel on the ICE Futures exchange.
Crude has plummeted about 12 percent from $106 two weeks ago amid investor worries that economic growth in the U.S. and China will slow more than previously expected. This week, political turmoil in Greece and growing anti-austerity sentiment in Europe have raised fears of a debt default that could hurt economic growth, undermining crude demand.
“It is again the same story as Greek uncertainty dominates the market, causing very volatile trading conditions and adding further pressure to the euro,” said an energy report from Sucden Financial in London. “We expect high volatility and nervous trading conditions to persist in the oil market, while the $90 per barrel level in the (Nymex) crude oil contract looks very vulnerable at the moment.”
A stronger dollar makes crude more expensive for traders using the euro and other currencies and tends to push down oil prices. On Thursday, the euro was down to $1.2676 from $1.2725 late Wednesday in New York.
Some analysts say a slowly improving U.S. economy and signs of growing oil demand in developing countries should keep the crude price from collapsing further.
“A drastic weakening of sentiment brought oil prices down sharply, with sovereign debt fears a key element in a mounting loss of faith in economic, and hence demand, prospects,” Barclays said. “Crude oil prices may well remain capped on the upside in the next few weeks by fears of major economic upheavals.”
“However, given the actual economic and oil demand picture, Brent prices are more likely to remain protected around $110 rather than attempting to break through to a more extreme downside,” Barclays said.
Should crude prices continue to fall or stay at the current lower levels, prices should also then drop for oil products such as gasoline, which would ease global inflation pressures and give policymakers more room to implement stimulus measures or loosen monetary policy to boost economic growth.
In other energy trading, heating oil was down 1.32 cents at $2.8844 per gallon and gasoline futures slid 1.09 cents at $2.91 per gallon. Natural gas rose 0.7 cent at $2.625 per 1,000 cubic feet.