Oil Falls as Italy and Spain are Downgraded

Posted by - Friday, October 7th, 2011

This past Monday, oil futures plummeted to the lowest level in a year on a better-than-expected manufacturing data.

It picked back up throughout the week, steadily climbing for three consecutive days. Today, however, futures fell back by as much as 1.3 percent largely based on their vulnerability to the crisis in the euro zone.

Earlier, prices did climb to as high as $84 per barrel in New York on information that payrolls climbed by 103,000 workers in the month of September. According to a previous Bloomberg News survey, only about 60,000 were expected.

But the good news wasn't enough to keep the rallies going...

"The economy and the Europe woes are just not lifting the market up," said Tony Rosado, oil options broker at GA Global Markets in New York. "It just seems like you have a wall of selling continuously."

Shortly after Fitch Ratings downgraded the ratings of Italy and Spain, just after 1:00 p.m., crude oil for November delivery dropped down to $81.50 per barrel – losing 1.3 percent for a deduction of $1.09.

Bent oil for November dipped by 1.1 percent to $104.60, losing $1.13 on the London ICE Futures Europe exchange.

As far as supply goes, U.S crude oil inventories dropped down to 336.3 million last week, falling by 4.68 million barrels – the lowest level since January.

From Bloomberg

The Fitch downgrades of Spain and Italy are a reminder of the looming European debt crisis and how unsettled the markets are,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The jobs numbers are not as strong as initially thought.”

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