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| Economic woes send oil $2 lower | |
| (about 5 hours later) | |
| The price of oil fell by more than two dollars on Monday, extending last week's decline that was prompted by poor US economic data. | |
| Brent crude - deemed the best indicator of the industry - fell $2.04 a barrel to $72.71 in afternoon trade in London. | |
| Meanwhile US sweet crude oil saw a similar fall, dropping $1.98 to $73.50. | |
| Analysts blamed the sharp price drop on sell-offs in world stock markets - which continued on Monday - as worries of a US slowdown continued. | |
| Concerns over the weak housing market were especially evident at the start of the week as American Home Mortgage sought bankruptcy protection and the president of Bear Stearns resigned following the collapse of two of the firm's mortgage funds. | |
| 'Risk adjustments' | 'Risk adjustments' |
| "The sell-off was continued from Friday and largely due to the decline in the US financial markets," said Gerard Burg, an oil and gas analyst at the National Bank of Australia. | "The sell-off was continued from Friday and largely due to the decline in the US financial markets," said Gerard Burg, an oil and gas analyst at the National Bank of Australia. |
| "Some investors may have taken risk adjustments and are selling out of liquid commodities assets to cover commitments in other markets. | "Some investors may have taken risk adjustments and are selling out of liquid commodities assets to cover commitments in other markets. |
| "Apart from the US factor, there are no major fundamental stories dragging down prices." | "Apart from the US factor, there are no major fundamental stories dragging down prices." |
| Worries of an economic slowdown in the US - a major energy consumer - increased after the Labor Department's report showed weaker-than-expected job growth for July and other government figures on slowing service-sector growth. | Worries of an economic slowdown in the US - a major energy consumer - increased after the Labor Department's report showed weaker-than-expected job growth for July and other government figures on slowing service-sector growth. |
| Dented enthusiasm | Dented enthusiasm |
| Equity markets have been concerned for some time that the problems affecting the US housing market will grow into a credit crunch that will hit the wider economy. | Equity markets have been concerned for some time that the problems affecting the US housing market will grow into a credit crunch that will hit the wider economy. |
| The sub-prime mortgage market, which offers high interest loans to higher risk customers or people on low incomes, has suffered as the US central bank - like many others - has increased interest rates to curb inflation. | The sub-prime mortgage market, which offers high interest loans to higher risk customers or people on low incomes, has suffered as the US central bank - like many others - has increased interest rates to curb inflation. |
| This has resulted in record numbers of defaults in the past year, and dented investor enthusiasm for financial companies that have exposure to the industry. | This has resulted in record numbers of defaults in the past year, and dented investor enthusiasm for financial companies that have exposure to the industry. |
| Higher interest rates have also made it more expensive and thus difficult for private equity groups to continue to finance buyouts. | Higher interest rates have also made it more expensive and thus difficult for private equity groups to continue to finance buyouts. |
| This has led to concerns that the takeover boom that has been a critical driver of stock market performance over the past few years could fizzle out. | This has led to concerns that the takeover boom that has been a critical driver of stock market performance over the past few years could fizzle out. |