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Oil Sinks To $29 Per Barrel

Low oil prices dragging world stocks lower.

by Herbert Lash

NEW YORK (Reuters) – Oil prices plummeted to $29 a barrel on Friday on the impending resumption of Iranian oil exports into an already flooded market as international sanctions against the country are lifted, dragging equity indexes around the world sharply lower.

Skittish investors snapped up gold and other safe-haven assets amid fears of a global economic slowdown, coupled with concerns about a potential credit default as lower commodity prices make payments by creditors in emerging markets difficult.

Major stock indexes in Europe and on Wall Street closed down more than 2 percent, while global crude oil benchmark Brent slumped more than 6 percent to settle below $29 a barrel, capping a 13 percent decline for the week.

“We’re seeing the final capitulation,” said Tina Byles Williams, chief investment officer at FIS Group in Philadelphia, which oversees about $4.4 billion in assets.

Williams said crude could hit $20 a barrel, a price analysts at Goldman Sachs have said may be needed to accelerate a slowdown in drilling and return global oil inventories to a supply-demand balance that would allow prices to rise.

The risk is that a creditor faced with declining revenues and higher payment costs because of a stronger dollar on its dollar-denominated debt sparks a default, Williams said.

“If that dollar-denominated debt went to finance commodity projects, then that’s obviously quite a toxic brew,” she said.

Source: Yahoo Finance