Oil plummets to $29, dragging world stocks lower
By Herbert Lash
NEW YORK (Reuters) - Oil prices plummeted to $29 a barrel on Friday on the likely resumption soon of Iranian oil exports into an already flooded market as international sanctions against Iran are lifted, dragging equity indices around the world sharply lower.
Skittish investors snapped up gold and other safe-haven assets amid fears of a global economic slowdown, coupled with concerns about a potential credit default as lower commodity prices make payments by creditors in emerging markets difficult.
Major stock indices in Europe closed down more than 2 percent, while Wall Street stock indexes tumbled even more. Global crude benchmark Brent settled below $29 a barrel, capping a 13 percent decline for the week.
"We're seeing the final capitulation," said Tina Byles Williams, chief investment officer at FIS Group in Philadelphia, which oversees about $4.4 billion in assets under management.
Williams said crude prices could hit $20 a barrel, a price analysts at Goldman Sachs have said may be needed to accelerate a slowdown in drilling and return global oil inventories to a supply-demand balance that would allow prices to rise.
The risk is that a creditor faced with declining revenues and higher payment costs because of a stronger dollar on its dollar-denominated debt sparks a default, Williams said.
"If that dollar-denominated debt went to finance commodity projects, then that's obviously quite a toxic brew," she said.
Yields on the benchmark 10-year U.S. Treasury note were poised to fall below 2 percent and gold rose as retreating oil prices and equity markets underpinned demand for assets perceived as safer. U.S. gold futures for February delivery settled up 1.6 percent at $1,090.70 an ounce. Continued...