Oil drops $4 on account of equities tail-spin

10 October 2008

Oil prices dropped $4 in Asian trade ahead of the weekend on account of the hugely depressed world equity markets that lead traders to become increasingly convinced that a global economic slowdown will adversely impact energy demand.

Brent North Sea crude sank below the $80 level for the first time in a year, and even news about an emergency OPEC meeting next month did not buoy prices. Economic woes seem to have taken precedence on the energy demand outlook above everything else.

Afternoon trade saw New York's main contract, light sweet crude for delivery in November, dropping $4.08 to $82.51. A day ago on Thursday, it had dropped $2.36 to $86.59 at the New York Mercantile Exchange. Brent North Sea crude for November delivery dropped $3.58 to $79.08 dollars having settled earlier at $1.70 lower at $82.66 on Thursday in London trade. The contract had first risen over the $80 mark in end September 2007, and the latest price is the lowest settlement in 50 weeks.

Analysts said that with the stock markets around the world going downhill, oil is spiralling downwards as well. The Tokyo stock exchange saw its largest loss in over 20 years, with other Asian markets falling between seven and eight per cent over fear that governments across the world would not be able to manage the global financial crisis.

Closer to home in India, the Sensex closed with a loss of 800.51 points or 7.07 per cent at 10,527.85. The Nifty lost 233.7 points or 6.65 per cent, to settle at 3279.95.

BSE Midcap slipped 334.48 points or 8.34 per cent at 3,676 and the Small Cap index was down by 343.74 points or 7.31 per cent at 4,355.45, marking the worst weekly performance for the Sensex and Nifty ever.