Oil tumbled as much as 6 percent on Thursday, with US crude crashing through technical support to its lowest since February as mounting fears of a stalled economy set off a global race from riskier assets. Suffering one of the sharpest sell-offs of the past two years, oil prices fell as European bond buying and Japanese currency intervention fuelled risk aversion across financial markets.
In-line weekly US jobs data failed to quell anxiety about slower growth that is already curbing oil demand. US crude turned negative for the year, while other commodities were also hammered as investors shed risky assets. The dollar rose 1.46 percent against a basket of currencies and bonds rallied, while Wall Street suffered its biggest slump in 14 months, falling more than 3 percent.
"A range of commodities are under selling pressure as a general 'risk-off' flow continues from investors suddenly far less complacent regarding the strength of the global economy," said Tim Evans, analyst at Citi Futures Perspective in New York. "The markets may also find few willing buyers ahead of tomorrow's US employment report," Evans added. In London, ICE Brent for September delivery fell $5.31 to $107.92 a barrel, by 2:41 pm EDT (1821 GMT) after extending the day's low to $107, the lowest since the June 28 intraday low of $105.35.
US crude for September delivery settled at $86.63 a barrel, sliding $5.30, or 5.77 percent, the biggest one-day percentage loss since May 5. It hit a session low of $86.04, the lowest since the February 18 intraday low of $85.65. Losses accelerated after breaking below key support at the June low of $89.61, with technical analysts now looking toward an $85 target.
US gasoline futures led the slump, with its premium over US crude falling to the lowest in a month after Wednesday's US oil inventory data added to evidence that expensive fuel and a weak economy have reduced consumption in the world's biggest oil user. September RBOB closed at $2.7372 a gallon, falling 19.41 cents, or 6.62 percent, front-month gasoline's biggest one-day percentage loss since the May 11 7.6 percent fall. It hit an intraday low of $2.7280, the lowest intraday since the February 28 intraday low of $2.70.
Oil's travails were part of a broader slide on commodities as investors sold-off on economic worries. The 19-commodity Reuters-Jefferies index, a global benchmark for the asset class, fell 2.76 percent, heading for its biggest daily drop since May 11.
First-time filings for unemployment benefits in the United States dipped slightly last week, a government report showed, marking a marginal improvement in the labour market.
Markets are awaiting Friday's release of US jobs data for July. Forecasters polled by Reuters expected nonfarm payrolls rose 85,000, after rising only 18,000 in June. The unemployment rate was expected to hold steady at 9.2 percent.