Oil extends losses to near $70 as stocks sink

[June 07, 2010]  SINGAPORE (AP) -- Oil prices fell to near $70 a barrel Monday in Asia, extending losses as regional stock markets sold-off amid fears Europe debt crisis is spreading.

Benchmark crude for July delivery was down $1.06 to $70.45 a barrel at late afternoon Singapore time after falling to as low as $69.51 earlier in the session in electronic trading on the New York Mercantile Exchange. The contract lost $3.10 to settle at $71.51 on Friday.

Oil traders often look to stock markets as a gauge of overall investor sentiment, and most Asian and European bourses plummeted Monday, extending a rout that began Friday with a 3.2 percent drop in the Dow Jones industrial average.

Weak U.S. employment data for May and fresh fears that Hungary must slash government spending to avoid a debt default have undermined confidence in global economic growth and oil demand.

"Investors are fleeing riskier assets so they're dumping stocks and oil," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "The market may be overreacting a bit, but the jobs report shows that the U.S. economy is still struggling."

Some analysts point to falling U.S. crude inventories as a sign of improving crude demand and expect prices to rebound later this year.

"The shift in the market's view of forward fundamentals has been too extreme," Goldman Sachs said in a report. "We continue to expect crude oil prices to move into an $85 to $95 trading range in the second half."

In other Nymex trading in July contracts, heating oil fell 1.32 cents to $1.9445 a gallon and gasoline dropped 1.33 cents to $1.9820 a gallon. Natural gas was down 3.5 cents at $4.762 per 1,000 cubic feet.

Brent crude was down 71 cents at $71.38 a barrel on the ICE futures exchange.

[Associated Press; By ALEX KENNEDY]

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