Crude Prices Down in Asia on ECB, China Rate Cuts
Crude prices slipped in Asia Friday as worries over the global economy were rekindled following interest rate cuts by central banks in Europe and China, analysts said.
New York's main contract, light sweet crude for August delivery shed 37 cents to $86.85 a barrel and Brent North Sea crude for delivery in August slid 69 cents to $100.01.
An expected slashing of interest rates by the European Central Bank (ECB) on Thursday coupled with a far more surprising rate cut by the People's Bank of China raised fresh questions about the state of the world economy, analysts said.
"The latest round of news of central banks in Europe and China cutting rates actually raised concerns about the European and Chinese economies," said Victor Shum, senior principal of Purvin and Gertz energy consultants in Singapore.
"Concerns about the economy mean concerns about oil demand," he told Agence France Presse.
China -- the world's largest energy consumer -- had on Thursday surprised traders by announcing that its benchmark one-year lending rate was cut by 0.31 percentage points and the deposit rate by 0.25 percentage points.
"The market interpreted that news as trouble ahead in the Chinese economy," Shum said.
The ECB's slashing of its key rate to a record low 0.75 percent on Thursday also sent markets south by way of a weakening euro, he added.
"The announcement by the ECB to cut its benchmark interest rate also failed to inspire investors... (and) caused the euro to weaken and that made the dollar stronger and caused a selling of crude futures," Shum said.
The euro plunged more than one percent against the U.S. dollar in late New York trade Thursday following the announcement of the ECB's rate cut. It was trading at $1.2383 against the U.S. dollar in early Asian trade from $1.2391 in late New York trade Thursday.
A weaker euro would make dollar-priced crude more expensive for traders using the European currency.