Brent oil price sinks under $72 as the Euro looses ground

1 June 2010 1 June 2010

BonTrade

Brent oil prices fell in lighter trading on Tuesday to back under $72 as the Euro looses ground to most other currencies including the US dollar, which puts the Euro at a four year low against the greenback.

Brent crude oil futures for July delivery on London’s ICE Futures Exchange was down $2.68 at $71.97 a barrel by noon GMT, which is nearly three percent off today’s open.

“Focus is back on to euro zone problems this morning and it is the bad loans story that is weighing on the euro in early trading,” said Audrey Childe-Freeman, currency analyst at Brown Brothers Harriman.

A stronger US dollar against the euro and other currencies weighs on oil prices as it makes the commodity much more expensive to buy for holders of other currencies.

Meanwhile, bank stocks fell following warnings of the potential bank writedowns in the European Central Bank’s latest Financial Stability report. “We are experiencing now a second wave of writedowns, which relate to the performance of loans,” said Lucas Papademos, the ECB’s vice-president.

At about 0850 GMT, the euro tumbled as low as $1.2115, touching a level last seen on April 14, 2006.

The euro will likely drop to $1.15 by year-end while oil will probably trade between $75 and $80 at the end of the year, said Jorg Zuener, chief economist for Liechtenstein-based VP Bank.

Brent crude oil prices continue to suffer losses as European and global stock markets once again show weakness.