Brent oil opens trading under $85, europe volcano continues

19 April 2010 19 April 2010

BonTrade

Brent oil futures opened the week’s trading below $85 in Asia, extending big losses on expectations that disruption to air travel from the Iceland volcano will undermine a recovery in Europe. In London, Brent crude oil futures for June delivery was down $1.12 at $84.87 on the ICE futures exchange.

“The market had underestimated the impact of the volcano,” said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. “There’s still a lot of uncertainty about how much this will affect the overall economy. I think the whole market sentiment has switched to less optimistic,” Chu said. “Things are pointing more bearish now.”

The Eyjafjallajokull volcano disaster is estimated to be costing airlines $US200 million a day. But the economic damage will roll through to farms, retail and nearly any business that depends on air cargo shipments. Fresh produce will spoil, and supermarkets in Europe will begin to run out.

”If it really drags on another week, that could be really serious,” said Peter Westaway, chief economist for Europe at the Nomura investment bank. The shutdown could affect productivity, he said, if hundreds of thousands of people missed work or were not able to do business because they were stuck in limbo.