London - Oil fell to seven-week lows - around 2% down - on Monday as the eurozone crisis deepened fears of wider financial contagion and recession, encouraging investors to dump commodities and stocks in favour of safer assets.
Gold and copper both tumbled more than 5% and silver lost more than 16% at one point, while US Treasuries rose.
World stocks fell towards 14-month lows and the euro hit a 10-year low against the yen as doubts grew over how effective Europe would be in containing the continent’s sovereign debt problems.
“These are very critical days and weeks ahead, reminiscent very much of the touch-and-go situation we were in back in 2008,” Edward Meir, senior commodities analyst at brokers MF Global said. “The key difference this time around is that it is countries and not companies that are in danger of going bust.”
Brent futures for November fell $2.31 to a low of $101.66 a barrel, the lowest intra-day level for the front-month contract since August 9. The contract recovering some ground to trade around $102.90 by 08:12 GMT.
Brent plunged 7.35% last week in its biggest loss since May 6. So far in September, Brent has fallen more than 10%.
US crude lost $2.74 to reach a low of $77.11 per barrel, after rising more than a dollar earlier. It had recovered to trade around $78.70 by 08:12 GMT, still down $1.15.
Reports European leaders were seeking new ways to solve the region’s debt problems lifted commodities in early trade, but the market reversed sharply on concerns policymakers were doing too little to stem the crisis.
“In the absence of formal measures to deal with the debt problem, the general statements coming out of the eurozone are unlikely to reassure the markets,” said Ric Spooner, chief market analyst with CMC Markets in Sydney.
“Until we get something more concrete, commodities will come under pressure as the risk of recession increases.”
Dollar risingThe stronger dollar, which rose around 0.2% against a basket of currencies, also weighed on oil prices as it makes dollar-denominated assets more expensive.
Reuters market analyst Wang Tao argued Brent will fall to $92.86 per barrel over the next three months, while US crude could fall to $64 per barrel by the end of 2011.
After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing €440bn rescue fund.
But investors had hoped for more concrete measures from a meeting of finance chiefs of the Group of 20 nations and the 187-country International Monetary Fund (IMF).
Greece, the epicentre of the crisis, is trying to secure its latest wad of cash from international lenders including the IMF next month to avoid a default.
The IMF said on Sunday its inspectors would probably return to Athens this week after getting written assurances on a new wave of austerity measures announced by Greece to resolve a debt crisis shaking the euro.
In the oil-producing Middle East, political unrest continues as Yemeni President Ali Abdullah Saleh made no pledge on Sunday to step down in his first address to the nation since returning home, calling for early elections in a move unlikely to appease protesters demanding his immediate departure.
In Libya, senior members of the country’s ruling National Transitional Council are leaning towards putting plans for a new caretaker government on hold because they cannot agree on a lineup, a source close to the council told Reuters.