Oil sees biggest monthly loss in 18 months on European crisis

01-Jun-10

US crude oil for July delivery rose to US$74.4, while London Brent crude settled at US$74.6 amid lackluster trade, as public holidays kept the markets in USA and UK closed on Monday. The euro saw a modest rise vs the dollar, and markets in Asia and Europe edged higher, but remained under pressure following Fitch's downgrade of Spain's credit rating. Chinese Premier highlighted the possibility of additional impending bad news to come as global growth continues to be vulnerable to sovereign debt risks. Oil prices have had their worst month since 2008 on concerns that the European economic crisis could lead to reduced fuel demand. After reaching a 19-month high of US$87.15 at the beginning of May, oil prices had their steepest monthly drop since late 2008. According to the latest Reuters survey, OPEC is only delivering 51% of agreed output curbs. OPEC's surplus capacity, which was at over 6 mln bpd at the start of the year, is likely to prevent the market rising strongly in the medium term on uncertain prospects for oil demand.