Crude plunges on economic concerns

Prices witness lowest settlement since last November

Crude prices ended substantially lower on Monday, 08 August 2011 at Nymex. Prices plunged as recent economic conditions questioned the demand and outlook for crude in the coming months to come. News that Standard & Poor's downgraded US debt last weekend kept stocks under heavy pressure on Monday, 08 August 2011. Prices also slipped following a strong dollar.



On Monday, crude oil futures for light sweet crude for August delivery closed lower by $5.57 (6.4%) at $81.31/barrel. It was the lowest settlement for crude since last November. It fell to a low of $80.17 and also rose to a high of $85.73 during intra day trading. Last week, crude shed 9.2%.

The United States late Friday lost its triple-A debt rating from Standard & Poor's for the first time in history, with the credit-rating agency saying the political system of the world's top economy has become less stable and that budget cutting announced earlier this week didn't go far enough.

S&P lowered its rating on the U.S. by a notch to AA+ and, to compound the embarrassment, said the outlook is negative as well, as it threatened another reduction in two years. The rating agency said the deal reached by lawmakers to cut the federal deficit by an estimated $2.1 trillion over a decade didn't go far enough, and “America's governance and policymaking is becoming less stable, less effective, and less predictable than what was previously believed.

In the currency market on Monday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, rose by almost 0.5%.

Among other energy products on Monday, September gasoline declined 11 cents, or 4.1%, at $2.69 a gallon. The settlement was gasoline's lowest since late February. Gasoline has lost nearly 14% this month. Other energy products tracked oil lower, with heating oil leading the way. The September contract lost 14 cents, or 4.8%, to settle at $2.80 a gallon. That was heating oil's lowest settlement since late June.

Natural gas for September delivery lost 1 cent, or 0.2%, to $3.94 per million British thermal units.

At the MCX, crude oil for August delivery closed lower by Rs 64 (1.7%) at Rs 3,779/barrel. Natural gas for August delivery closed at Rs 178.8, higher by Rs 2.7 (1.5%).