Euro woes drag oil prices below $70
CRUDE oil prices tumbled below $70 (€56) a barrel for the first time this year, and analysts said further falls were on the way.
Melissa Kidd, of Lombard Street Research in London, said this year's surge in oil prices to $86 a barrel had all the marks of a "dead cat bounce" and the trend in prices was downwards.
"The tide has turned against the bulls," said Stephen Schork, president of consultant Schork Group Inc in Pennsylvania.
"The weakness of the euro and worries about the contagion risk from Greece are the primary factors moving oil."
Oil fell as much as 3.3pc in New York trading. Ms Kidd said prices were heading "well south" of $70 a barrel as China's cooling economy slows its demand for oil.
"The spot price fell to $31 per barrel from its July 2008 peak of $146 and then retraced half its losses. Since then, it has resumed its decline," she said. "The oil sell-off in early May began as part of a wider fall in risk assets, prompted by the euro area financial crisis."
The spot price fell sharply, but market expectations for higher oil prices in future held firm. More recently, however, longer-term expectations have also become dislodged.
"Evaporating speculator support for oil prices is vulnerable to further signs of slowing demand from China, and to Beijing's monetary tightening. The fiscal crisis in Greece provided a natural trigger for the reversal in prices, but it is developments in China that are turning what could have been a brief wobble into a prolonged slide in prices," Ms Kidd said.
UN data to February showed the quarterly growth rate of oil products demand had fallen for three consecutive months. "The decline in oil prices right across the future price curve suggests recent price falls are not just a temporary setback," she said.