NEW YORK: Oil plunged 6 percent on Thursday, heading for the biggest daily drop in two years as concerns about economic growth and monetary tightening sent commodities prices spiraling lower.
Bearish signals came from data in both Europe and the United States, adding to economic concerns that have battered commodities markets all week. German industrial orders fell unexpectedly in March while US weekly jobless claims hit eight-month highs.
World stocks fell and the 19-commodity Reuters-Jefferies CRB index traded down 3.7 percent, headed for its biggest drop since March 2009. The index, a global benchmark for the asset class, extended weekly losses to 7 percent, which would mark the worst week since late 2008.
‘The longer-term bull cycle is still in place, but this correction may have a life span of several months, as weaker economic data is fueling this correction to a large part,’ said Sterling Smith, senior analyst for Country Hedging Inc in Minnesota.
Brent crude futures for June traded down $6.97 to $114.22 a barrel at 12:12 p.m. EDT (1612 GMT), the fourth straight day of losses, smashing below the 50-day moving average as the sell-off picked up steam after prices dropped below $120 a barrel.
Brent was headed for its biggest one-day percentage loss since April 2009 and the largest four day drop since May 2010.
US crude fell $6.50 to $102.74 a barrel.
Trade levels surged, with volumes for Brent up 60 percent over the the 30-day moving average and 50 percent over the 250-day average by midday in US activity. US crude volume was 10 percent over the 30-day average.
The disruption of oil exports from Libya, concerns about the supply impact of unrest in the Middle East and Africa, and the weaker dollar have sent crude to the highest level since 2008, with Brent topping $127 a barrel this year and US crude over $114 a barrel.
Selling pressure on oil and other commodities came on several fronts this week, with investors weighing factors from the death of Osama bin Laden to the impact of higher fuel and commodity costs on the economies of consumer nations to monetary policy in major economies.
‘Crude oil is selling off sharply for two primary reasons: QE2 is coming to an end in June and without a QE3 behind it, it will take liquidity out of the market, hurting risky asset classes such as commodities,’ said Chris Jarvis, senior analyst, Caprock Risk Management in New Hampshire.
‘With Osama bin Laden dead, the market is adjusting the geopolitical risk premium down accordingly. Given this, speculative money is being taking off the table.’
India's central bank raised rates more than expected on Tuesday, and expectations No. 2 oil consumer China could take similar actions helped push down prices on Wednesday.
The dollar gained 1.2 percent against a basket of currencies, with the euro on track for its worst day against the greenback since November after the European Central Bank signaled that interest rates were unlikely to rise next month.
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