Oil hits six-month low as risk aversion sweeps markets

Wed May 30, 2012 5:39pm EDT
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By Robert Gibbons

NEW YORK (Reuters) - Oil dropped more than 3 percent on Wednesday to the lowest level in nearly six months as fears about the euro zone crisis sparked an erosion in risk appetite across markets.

Prices for Brent and U.S. benchmark West Texas Intermediate crude futures headed toward their biggest monthly drop since the financial crisis of 2008, with U.S. oil breaking below a key technical level as investors headed to perceived safe havens.

Worries about Europe mounted as borrowing costs rose for Spain and Italy and the latest poll showed a lead for Greece's left-leaning, anti-austerity parties ahead of next month's election.

The crisis, which could dent fuel demand, has helped knock Brent prices down to nearly $100 per barrel, far off 2012 peaks over $128 hit in early March. Equities and other commodities, including industrial metals platinum and copper, also fell. <MKTS/GLOB> <MET/L>

Wall Street stocks fell more than 1 percent, with European equities also posting sharp losses, while U.S. Treasuries rallied, sending yields of benchmark 10-year notes to a 60-year low. .N .EU

"This is about a global slowdown, European concerns, and a lack of liquidity," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

"Funds have run for the hills, and I believe those were the guys who were propping up the market."

The Thomson Reuters-Jefferies CRB index .CRB, a global benchmark for commodities, tumbled 1.68 percent to the lowest levels since September 2010.   Continued...

A worker is silhouetted as he walks past fuel storage tanks at an oil refinery in Melbourne June 21, 2010. REUTERS/Mick Tsikas