Oil prices fell on Monday, following a sell-off in the stock market caused by fears of a recession in the United States, although the decline was limited due to the loss of supplies from Libya and concerns that the spread of conflict in the Middle East could further affect crude oil supplies, writes UNN with reference to Reuters.
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Equity markets fell across Asia as fears of a recession in the US forced investors to rush to get rid of risky assets, betting that rapid interest rate cuts will be needed to boost economic growth.
Brent crude futures were down 76 cents, or 1.0%, at $76.05 a barrel by 1335 GMT, with prices earlier trading around their lowest since January. U.S. West Texas Intermediate crude was down 77 cents, or 1.1%, at $72.75.
Supply concerns have limited losses. Libya's largest oil field Sharara has completely stopped production, Bloomberg reports. Two field engineers told Reuters on Saturday that local protesters had partially closed the site.
Concerns about a recession in the U.S., prompted by a weak July wage report on Friday, " only exacerbate concerns about demand in China that have been in the oil market for some time," ING analysts led by Warren Patterson said in a note.
Reducing diesel consumption in China, which contributes the most to the growth of global oil demand, is also putting pressure on oil. The decline in oil prices followed a drop in European stock markets.
Oil losses are also limited by geopolitical risks in the Middle East. Fighting in the Gaza Strip continued on Sunday, a day after a failed round of ceasefire talks in Cairo.
Israel and the United States are preparing for a major escalation in the region after Iran and its allies Hamas and Hezbollah vowed to retaliate against Israel for killing Hamas leader and high-ranking military commander of Hezbollah last week.
"The risk of a larger regional war, while I still consider it small, cannot be ignored," said Sydney - based IG market analyst Tony Sycamore.