Oil down over 2pc on equities' dip, euro zone worry

Thursday, 28 June 2012 21:27

Posted by Shoaib-ur-Rehman Siddiqui

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NEW YORK: Crude oil futures extended losses to more than 2 percent o n T hursday, pressured by equities which fell further after the US Supreme Court decision upholding key elements of President Barack Obama's healthcare reform law.

Pessimism that a crucial EU summit would do little to find long-lasting solutions to the euro zone debt crisis sparked the early fall in crude futures.

Trading on Wall Street was volatile after the Supreme Court upheld the centerpiece "individual mandate" provision of the Obama healthcare overhaul. Equities were already lower on skepticism that the European Union Summit will result in concrete measures.

In Wednesday's trading, crude futures rose on a strike by Norwegian oil workers that reduced North Sea oil output and data that showed US crude and distillate stockpiles declined last week.

"The further fall in equities triggered by the Supreme Court decision exerted selling pressure on crude futures," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

In London, Brent crude oil futures for August fell $1.52 to $91.98 a barrel by 11:10 a.m. EDT (1410 GMT) after sliding to a session low of $91.55.

US August crude slid $1.73 to $78.47 after skidding to a session low of $78.24.

Technical support for US crude at around $79 was breached in the surge of selling after equities slid further, Armstrong said.

EU leaders meet in Brussels on Thursday openly divided, with German Chancellor Angela Merkel pitting herself against France and Italy and insisting they put the bloc's fundamental problems ahead of emergency action.

"Market sentiment is very negative," said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. "There are concerns that the EU summit will disappoint."

Analysts say the euro zone debt and financial crisis is stifling activity in the region, eroding investor confidence and dampening economic growth in other parts of the world.