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US oil slides back under $96, hit by emerging market fallout

Monday, 27 Jan 2014 | 2:34 PM ET
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Oil prices fell more than $1 on Monday as investors continued to dump risky assets on worries about weaker growth in emerging markets.

Global equities markets extended losses from last week on concerns about China's economic slowdown and expectations that the U.S. Federal Reserve will scale back its bond buying by another $10 billion.

The U.S. government also announced weaker-than-expected new home sales data Monday, causing U.S. equities to give back early gains and triggering a correlated dip in Brent and U.S. crude oil futures prices.

The Fed will conclude its regular two-day meeting on Wednesday. Analysts said the central bank was intent on cutting the stimulus again in spite of the brutal selloff of emerging market assets in Turkey, Argentina and elsewhere.

Brent crude was down more than $1 to under $107 a barrel. U.S. crude fell by 92 cents to settle at $95.72.

Emerging markets had benefited from investment flows when interest rates in the United States and other developed markets were low. But now that the Fed is changing course, investors are getting out of the emerging markets with large current account deficits, raising fears over their future economic health.

Analysts also said concerns over Chinese growth following weaker-than-expected data last week were weighing on Brent. Capping losses in U.S. crude were forecasts for two more weeks of cold weather in the heavily populated Midwest and Northeast and last week's opening of the southern leg of TransCanada Corp's Keystone pipeline, which will help alleviate the supply bottleneck at the contract's delivery point in Cushing, Oklahoma.

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