Due to Spanish Recission > Oil Prices Hit
1st May 2012
World oil prices fell on Monday April 30, 2012, making a downbeat start to the week as investors fretted over Spain's recession and stuttering US economic growth, analysts said.
New York's main contract, West Texas Intermediate (WTI) crude for delivery in June, dropped 71 cents to $104.22 a barrel.
Brent North Sea crude for June shed 75 cents to $119.08 in London late afternoon trade.
Official data released in Madrid showed that Spain has tipped back into recession -- another dose of grim news for a cash-strapped economy that has been hobbled by rising sovereign debt, soaring unemployment and deeply troubled banks.
Spanish gross domestic product (GDP) shrank by 0.3 percent in the first quarter of 2012, equalling the slump in the final quarter of 2011.
"Crude oil prices started the week in negative territory, following fairly disappointing economic data from Spain that confirmed that the Spanish economy is sliding into recession," said Sucden broker analyst Myrto Sokou.
"The data weighed on crude oil prices, confirming a slowdown in oil demand, especially from the European countries due to the lack of economic development."
Investors fear that Spain could follow a Greek-style downward debt spiral and trigger chaos in the market, in turn ravaging global energy demand.
The return to recession, blamed on weak domestic demand only partially compensated by exports, comes barely two years after Spain emerged from the last downturn at the start of 2010.
Doubts about Spain's ability to meet its deficit goals have been amplified by the plight of the banks, many bogged down in bad loans extended during a property boom which collapsed in 2008.
Standard & Poor's on Monday downgraded the ratings of the top Spanish banks, including Santander and BBVA, after slashing the country's credit standing because of the deficit and recession.
"Given the size of the Spanish economy, the size of its debt burden and the exposure of banks across the eurozone, for 'Spain in crisis' read 'the eurozone in crisis'," said PVM Oil Associates analyst David Hufton.
Spain is the fourth-biggest economy in the 17-nation eurozone region, which remains blighted by the ongoing sovereign debt crisis.
Oil prices also lost ground on Monday after data showed that US economic growth slowed sharply in the first quarter of 2012, rekindling concerns that the nascent recovery in the world's top oil consumer was losing steam.
US GDP grew at an annual rate of 2.2 percent in the first three months of 2012, slowing from 3.0 percent in the fourth quarter of 2011, official data showed Friday.
The decline in economic activity was largely attributed to a decline in government spending.
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