Oil prices resumed their downward dive Monday, dropping 55 cents on the New York Mercantile Exchange on continued macroeconomic and euro-zone anxiety to close at $79.21 a barrel.
Traders overlooked news of modest petroleum outages in the U.S. and Norway to push oil prices lower in tandem with major equity indices amid the broader gloom in the markets. Analysts say the oil story continues to be dominated by copious crude inventories and weakening demand in the uncertain economy.
"The crude oil market continues to sink in sympathy with weaker equity markets and a softer euro as the economic prospects in Europe remain uncertain," said Citi Futures analyst Tim Evans, adding the aspirations are modest for a European summit later this week.
Monday's trading came as Spain formally requested a bank bailout Monday from the European Union, and as Cyprus joined the group of countries seeking assistance from the European Financial Stability Facility.
Broader equity indices like the S&P 500 were off about 1.5% at midday.
Oil "still has more to fall. This euro-zone situation keeps getting worse and worse," said Again Capital's John Kilduff. Mr. Kilduff predicted oil prices would sink further as some traders exit positions in the coming days with the end of the second quarter.
Monday's trading was noteworthy following news that U.S. Gulf producers had shut 608,025 barrels of oil and 1.56 billion cubic feet of natural gas due to Tropical Storm Debby.
In Norway, about 700 oil workers went on strike due to disagreements about salary and retirement age. A Norwegian petroleum association said the strike would result in closures of about 268,000 barrels of oil equivalent per day. The association said two fields will have to cease production, but that it will take about four to five days to shut down the two fields.
But traders Monday said the Norwegian outage didn't register as significant next to the broader euro woes. Meanwhile the outage in the Gulf of Mexico proved less significant than initial expectations once the storm turned eastward away from the key producing areas in the Gulf of Mexico.
Despite the gloom, not all insiders say a further retreat in oil prices is a sure thing. The picture could change suddenly if the disagreement over Iran's nuclear program intensifies, or if another Gulf storm forms, said Tariq Zahir of Tyche Capital Management.
"Obviously we are in a bear market in crude," Mr. Zahir said. "The fundamentals are extremely weak, but there are a lot of bullish developments that could push the price higher."
Copyright (c) 2012 Dow Jones & Company, Inc.
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