Oil fell $3 Thursday as a raft of weak U.S. economic data provided a fresh blow to shaky investor confidence and extended U.S. oil's losses to 13 percent so far in August.
Early pressure from disappointing U.S. weekly jobless claims and July home sales reports sparked a steep sell-off mid-morning, before a report showing factory activity in the U.S. Mid-Atlantic region in August dropped to the lowest level since March 2009.
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Gold hit a fresh record as investors sought safe havens and fled equities and commodities, which have been battered this month by concerns about the U.S. deficit, the euro zone debt crisis and a darkening economic outlook.
``It's much of the same -- concerns over European banks, U.S. deficits weighing on economic growth and the possibility of a global recession as the end result,'' said Chris Jarvis, senior analyst for Caprock Risk Management, Hampton Falls, New Hampshire.
``These cross currents are driving wild swings for riskier asset classes such as equities and commodities, specifically crude oil. Until clarity improves, we expect volatility to remain elevated relative to historical norms.''
The dollar rose and U.S. stocks tumbled 4 percent and the Reuters-Jefferies CRB, an index which tracks 19 commodities, was down 2.4 percent in the steepest one-day loss since the U.S. credit downgrade by Standard and Poor's. Brent crude futures fell $2.99 to $107.61 a barrel by 1124 EDT (1524 GMT), down from near $117 a barrel at the end of July.
Losses were heavier in U.S. crude, down $4.13 to $83.45 a barrel, in the biggest one-day drop since Aug. 8 and off end-July levels near $96 a barrel. U.S. crude's discount to Brent widened to over $24 a barrel. Implied volatility in the oil market soared as prices dropped, with the Chicago Board Options Exchange's Oil Volatility Index hitting 54.23 percent to its highest level in more than a week after and snapping a steady down trend.
Analysts have revised down forecasts for fuel consumption in recent weeks as concerns about the economy increase, and Morgan Stanley cut its forecast for global GDP growth for 2011 and 2012. The latest worries came from data showing U.S. existing home sales unexpectedly dropped in July, a rise in the number of Americans claiming new jobless benefits last week, and consumer prices increasing at the fastest pace in four months in July.
The market was also closely watching developments in Syria and Libya, where exports have been disrupted by a six month civil war against Muammar Gaddafi. Libyan rebels took control of an oil refinery and blocked the main highway north to the capital, further isolating Gaddafi's Tripoli stronghold. U.S. President Barack Obama banned U.S. imports of Syrian oil as part of sanctions against Amman, and joined the European Union in calling for President Bashar al-Assad to step down after a five-month crackdown on protesters.
Syria supplies a small amount of oil to the United States, shipping about 10,000 barrels per day of refined products to the world's top consumer in the first five months of 2011, out of total imports of near 9 million bpd.
(Reporting by Matthew Robinson, Gene Ramos, Robert Gibbons, Eileen Moustakis and Selam Gebrekiden in New York, Francis Kan in Singapore and Ikuko Kurahone in London; Editing by Marguerita Choy)