Crude oil prices hammered lower as stock markets tumble

Both Brent and WTI crude oil prices are being hammered lower in afternoon trading today, down over two percent, as stock markets around the world tumble and investors wonder if a double dip is on the cards.

US Light crude oil futures for September 2010 delivery was trading at $78.22, 17.30 GMT on the NYMEX, while Brent crude oil futures fell to $77.73 on the ICE Futures Exchange.

The decline in oil prices matched a downturn in the US stock market as investors around the world took a dimmer view of the US economy after the US Federal reserve comments yesterday evening.

Meanwhile, the EIA said that the short term economic outlook “is highly uncertain” and that significant risks to oil demand growth remain, meaning prices may well fall before the EIA expects oil futures to rise again. The EIA said US oil stocks declined 3 million barrels on the week ended August 6th, many analysts polled by Platts had expected a decline of just 2.4 million barrels.

“Our short term bias for oil futures remains to the downside at this stage. A short term decline in oil prices should be relatively modest given that we are entering the ‘meatier’ part of the US hurricane season” analysts at MF Global said in a note earlier today.