Oil prices in global markets fell sharply on Monday after a warning from the world’s largest bank, Citigroup, that it would be forced to make another significant write-down of assets related to risky mortgage loans in the U.S. renewed concerns about the outbreak of an economic crisis as a consequence of the crisis in global credit markets.
On the American market, oil fell by $1.63 to $94.30 per barrel, after reaching a record $96.24 on November 1. On the London market, it decreased by $1.36, dropping to $90.72. Oil prices have strengthened by about 40 percent since last summer, reaching a record of over $96 per barrel last week, driven by a weakening dollar, concerns about supply adequacy this winter, and speculative investments in oil and other commodities. However, Citigroup’s warning has raised new concerns about the state of the U.S. economy and the potential weakening of American demand for energy, emphasizes Tony Nunan, risk manager at Mitsubishi Corp. in Tokyo.
"Everyone is afraid of a slowdown in the U.S. economy, and the latest news from Citigroup has further worried the market," he said. The largest American bank, Citigroup, announced that it may have to write off up to $11 billion related to subprime mortgage loans, in addition to the $6.5 billion in the previous quarter. The rise in oil prices is also influenced by new tensions in the Middle East, including the recent conflict between Turkish authorities and Kurdish rebels in northern Iraq. Iran, the fourth-largest oil exporter in the world, announced on Sunday that it is open to proposals regarding cooperation with other countries in uranium enrichment, but that it will not accept an offer that would obligate it to suspend its nuclear program. (H)
