Oil Falls Below $70 on Persisting European Worries, Gold Down As Investors Cover Loss

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Oil is falling fast in early morning trade, breaking the psychologically critical $70 level as persistent worries about Europe's sovereign debt hampering global growth pushes down energy demand. A strengthening dollar following the International Monetary Fund's urging to get Spain to do more to reform its financial sector has also triggered investors to continue their sell-off of crude.

As for gold, it is down slightly and many analysts expect the yellow metal to face selling pressure in the near term as investors look to cover their losses in other markets. Still, gold is seen retaining its allure as a safe haven in the longer term, especially if investors remain rattled by the financial situation in Europe.

At 0750 ET, Brent crude is 2.9% weaker at $69.14 a barrel, while light sweet crude is down 3.5% at $67.77 a barrel, and natural gas is 0.3% lower at $4.00 a million British thermal units.

Gold is down 0.1% at $1,192.40 an ounce, while silver is down 1.4% at $17.74 an ounce, and copper is 3.2% weaker at $3.05 a pound.

Market players will be watching carefully the release of the latest weekly U.S. crude inventories data by the American Petroleum Institute later in the day, and by the U.S. Department of Energy Wednesday morning. Most analysts expect inventories to continue increasing due to rising imports.

The rapid decline in oil prices has yet to rattle major crude exporters, however, at least in public. Kuwait's oil minister Sheikh Ahmad al-Abdullah al-Sabah said that OPEC has no plans to do anything about the 26% drop in prices this month, and that the Organization of Petroleum Exporting Countries has no plans to hold an emergency meeting.

Meanwhile, Tesoro Corp.'s ( TSO ) Los Angeles refinery reported a small hydrocarbon release from a line which was an isolated incident, according to a notice filed with the California Emergency Management Agency. The refinery produces about 100,000 barrels a day.

In the metals market, Anglo American plc ( AAL ) is seen resuming paying out dividends in August, according to Goldman Sachs. Analyst Peter Mallin-Jones said in a report that Anglo American's finances are in a "healthier position" as it sold off assets to reduce debts on the one hand, and metals prices increased on the other. Goldman raised its rating for Anglo American to conviction buy from neutral.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities

Referenced Stocks: AAL , TSO

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