Oil prices plunge to five-year low

oil

Oil prices fell to their lowest in five years on Monday, hit by slowing factory activity in China and Europe. The fall affected market stocks and various currencies linked to the commodity.

Plunging prices for oil and other commodities raised fears of deflation, especially in the Euro zone and Japan.

In a further blow to Japan, the Moody’s ratings firm cut its credit rating to A1 with a stable outlook from A3, briefly pushing the yen even lower.

Russia’s rouble dropped more than 4 percent against the dollar while Malaysia’s ringgit, also oil-dependent, was on course for its biggest two-day fall since the 1997-8 Asian financial crisis.

“Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices,” said Neil Williams, chief economist at fund manager Hermes in London.

Oil prices have been falling for five months as abundant supply outstrips demand. OPEC last week declined to curb output to lift prices. Brent crude LCOc1 fell 2.4 percent on Monday alone, to $68.54 a barrel.

Meanwhile, gold fell more than 2 percent at one point to $1,142.90 per ounce its lowest level in more than three weeks, after Swiss voters rejected a proposal to force the central bank to buy more gold. The metal later recovered to $1,155.37.

Credit: Reuters