Oil prices plunged almost nine percent Monday in New York as markets were gripped by fresh worries about the slumping economy and weaker energy demand. New York's main futures contract, light sweet crude for May delivery, tumbled to $45.88 a barrel, a drop of $4.45 (8.84 percent) from Friday's close. In intraday trade, it fell to a month-low of $45.50 dollars. In London, Brent North Sea crude for June delivery shed $3.49 (6.5 percent) to settle at $49.86. “It's a correction wiping out gains which didn't seem in line with supply and demand fundamentals,” said Antoine Halff, vice president of NewEdge Group. Independent analyst Ellis Eckland said that “markets across the board have returned to risk aversion.” Traders since early March have tracked a spectacular rebound on stock markets from heavy losses, pushing oil up to about $50 a barrel. But Wall Street stocks were tanking Monday, and the major European equities indexes closed sharply lower. The equities slump reminded investors about the dire state of the global economy, wracked by recession and financial turmoil, and the subsequent erosion of oil demand, analysts said. “If Wall Street continues to fall, the barrel could fall very quickly to $40,” said Eckland. According to Halff, crude oil also was undermined by a strong rise in the dollar against most major currencies. The US currency was trading near $1.29 for a euro, its highest level in a month. The plunge in oil prices came as US oil reserves stand at a 19-year high. Investors holding the May delivery New York contract are being driven to cut prices on the day before the contract expires. “The economic reality of poor demand and ample supply has apparently dawned on market participants,” said John Kilduff at MF Global. The oil minister of the United Arab Emirates said Monday that oil at $50 a barrel would help bolster the global economy, according to the official WAM news agency. “OPEC's latest decisions to cut production have led to the stabilization of prices at the $50 level, a price that provides needed support for the global economy and allows for investments,” Mohammad Al-Hamli was quoted as saying. Hamli said the current price reflects the reality of the global recession, adding that “reasonable” oil prices are needed for the revival of the global economy. The United Arab Emirates is the world's ninth-largest oil producer. Investors are seeking shelter in investments like gold and the dollar as stocks tumble on fresh concerns about soured loans at banks. Gold prices spiked while more economically sensitive commodities like energy and agriculture futures plunged. The move back into gold, and an extension of recent gains for the dollar, came amid frenzied selling on Wall Street as doubts grew about banks' recent profit reports. Many investors are worried that the better-than-expected results from banks like Bank of America Corp., Wells Fargo and Co., JPMorgan Chase and Co. and Goldman Sachs Group Inc. are not sustainable.
