Crude Drops Below $68

Source:

"The tone of the oil complex remains extremely weak."

Crude-oil futures tumbled more than 3%, hit by weak equities and strength in the USD spurred by worries over the health of European economies and political tensions in Korea.

Light, sweet crude oil for July delivery on the NYMEX was down $2.62, or 3.7%, at $67.59/barrel in recent trade. It hit an overnight low of $67.15 and traded to a high of $69.91. ICE North Sea Brent for July was down $2.76 a barrel, at $68.41.

"This morning's political and financial developments are reinforcing our opinion that lower prices lie ahead with the $64$65 area. . .now looking like an 80% probability," said Jim Ritterbusch, president of Ritterbusch & Associates. "The tone of the oil complex remains extremely weak," he said, adding that further selling by speculative investors is expected before the crude price finds a bottom.

U.S. stocks opened sharply lower, following steep slides in foreign equities markets, and the euro neared a fresh four-year low against the dollar.

Lawrence Eagles and his team of analysts at J.P. Morgan warned that if unity of OPEC is questioned in the current price decline, the market "will feel that price is on the losing end of a game of chicken." Kuwait's oil minister dismissed the need for OPEC to act, calling on other members to trim production to agreed output levels.

Eagles said if Kuwait, Saudi Arabia and the UAE, which have adhered to output levels won't lower output until compliance by other members improves, that will stir uncertainty in the market. He noted the market expects OPEC to intervene to limit a fall to $60 a barrel, but said, in the absence of a clear signal about a floor price, "the market is getting more nervous."

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