The September contract for West Texas Intermediate light sweet crude oil fell $5.30 to settle at $86.63 -- earlier hitting a year-to-date low of $86.04. Brent crude oil for September delivery tumbled $5.44 to $107.79 a barrel, down a third straight day and earlier hitting a one-month low of $107.
The U.S. dollar index was surging by 1.6% to $75.09 as risk averse traders weighed on the Bank of England's vote to keep interest rates at 0.5% and maintain its current monetary easing program, and the European Central Bank's decision to hold rates at 1.5%.
Traders continue to fret over the possibility that European Union debt problems could spread to Spain and Italy and lead to sovereign debt restructuring.Capital Economics thinks that the European Central Bank's interest rate hikes for curtailing inflation have come to an end on very slow growth in the region going forward. Eurozone retail sales ticked up a mere 0.9% in June, following a 1.3% decline in May. In the U.S., initial jobless claims fell, but remained stubbornly high at 400,000 in the week ended July 30, down by 1,000. Last week's level was upwardly revised to 401,000, from 398,000. Martin Feldstein, President Emeritus at the National Bureau of Economic Research, believes there's now a 50% chance that the U.S. could fall back into a recession. The Department of Energy report on Wednesday showing a 950,000 barrel increase in U.S. crude inventories last week also weighed on oil stocks. This, as MasterCard Advisors SpendingPulse's latest U.S. gasoline demand report for the week ending Jul. 29 said that U.S. gasoline consumption was up by a "minuscule" 0.1% compared with a week earlier. The macroeconomic indicator is based on aggregate sales and services activity in the MasterCard payments network. Crude oil stocks are 1.57% above levels two years ago and stocks specifcally at Cushing, Okla., the main point of crude oil delivery in the U.S., are 8.11% higher than two years ago, according to a Cameron Hanover report. "We want to be bearish, for a number of reasons, not least among them the fundamentals," Cameron Hanover analysts say. "But the oversold pressures are telling us this market is a buy ... while everything except support is telling us this market should go lower." "And, there is one event that could take oil prices right back up -- QE3. With the stock market getting hammered, there has been fresh talk of the Fed possibly giving us another round of quantitative easing -- QE3. If that were to be the case, then oil prices would advance significantly. And the dollar would get killed." Natural gas for September delivery lost 3.4% to $3.95 per million British thermal units on a bigger-than-expected 44 billion cubic feet injection of natural gas stocks last week and the worries about the impact of slowing economic growth on industrial demand for the commodity. "The larger-than-expected 44 bcf in net injections for last week reinforces the idea that rising production has largely been a match for hot temperatures and strong utility demand for gas," said Citi Futures Perspective energy analyst Tim Evans. Oil and gas stocks were falling. Apache Corporation (APA - Get Report) was losing 5.6% to $111.86, Anadarko Petroleum (APC - Get Report) was tumbling 7.6% to $74.21, Devon Energy (DVN - Get Report) was falling 4% to $72.76, Eagle Rock Energy (EROC) was behind 6.8% to $10.18, Chesapeake Energy (CHK - Get Report) was under by 6.7% to $31.93, Kinder Morgan Inc (KMI - Get Report) was down 3.4% to $26.79 and Kinder Morgan Energy Partners LP (KMP) was lower by 2.6% to $67.62. -- Written by Andrea Tse in New York.
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