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Oil falls 4% on economic recovery concerns

(Agencies)
Updated: 2009-07-07 06:51

NEW YORK: Oil settled 4 percent lower on Monday as doubts over a potential rebound in the global economy spurred investor risk aversion.

US crude settled at $64.05 a barrel, down $2.68 or 4.02 percent from Thursday's close, after touching a five-week low of $63.40. US markets were closed on Friday for the Independence Day holiday weekend.

An employee fills a car with petrol at a gas station in Jammu July 1, 2009. [Agencies]

London Brent crude fell $1.56 from Friday's close to settle at $64.05 a barrel.

Optimism that an economic recovery could bolster demand has helped lift crude off December lows below $33 a barrel. Recent weak economic data -- including a poor US jobs report last week -- has weighed on markets, however.

US stock markets dipped early, despite data showing the US service sector contracted at a decelerating pace last month and posted the highest activity level since September 2008.

"A lot of people are nervous about the economy, and now everybody wants to get out of the exits at the same time," said Phil Flynn, PFGBest Research, Chicago.

"We are seeing this in the stock markets, the gold market and markets for other commodities, including oil. We did get a little bit of support in the latest ISM (service sector) numbers, but all in all, I feel that demand will be on a downward trend in the next couple of months," Flynn added.

Related readings:  Speculators causing oil price fluctuations, says NEA chief  OPEC President: $68-71 favorable oil prices  Experts: Oil prices may go up further  Oil rises to 8-month high on weaker dollar, Nigeria attacks

The yen gained broadly and the US dollar also edged up as investors shunned risk and bought currencies perceived to be safe, adding pressure to commodities denominated in greenbacks.

The Reuters-Jefferies CRB index (.CRB), a global commodities benchmark, gave up more than 2 percent by the mid-afternoon.

Crude has also taken some support from attacks on oil installations in OPEC member Nigeria.

Nigeria's main militant group said on Monday it had sabotaged a Chevron oil facility and seized a chemical tanker and six crew members, the latest in a string of disruptions to output from Africa's biggest energy producer.

France and Britain called for action to curtail oil price volatility as part of a move toward tougher global governance to prevent a return to economic problems that existed before the financial crisis.

Crude prices hit a record $147 a barrel last July before crashing to $32.40 a barrel in December, as the economic crisis battered global fuel demand.

Traders work in the crude oil options pit at the New York Mercantile Exchange July 6, 2009 in New York City. The price of crude oil dropped to a five-week low amid concerns about the progress of a global economic recovery.[CFP]

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