The two main oil prices indexes are falling again today on the back of fresh concerns that high levels of government debt in European periphery countries comprising the ‘PIIGS’ (Portugal, Ireland, Italy and Spain) may lead to prolongued economic turmoil in the Eurozone.
Brent crude is down 89 cents a barrel on yesterday to $116.35 a barrel, while US crude for August dropped 76 cents to $94.39. Both contracts fell more than $1 yesterday.
Market fears of so-called contagion have been raised by the rapid increase in Italian bond yields (the price Italy has to pay to borrow money on international markets). Italy’s economy is significantly larger than Greece’s and so proving it with a similar financial assistance program may be more than Eurozone countries can bear, economically or politically.
The yield on Italy’s 10-year debt has risen by nearly 1% in the last two days, a movement not seen since market panic over Greece’s solvency early last year.
Developments in Europe compound expectations of softening demand for oil raised by poor export data from China and far weaker than expected jobs figure from the US which signal that economic recoevry there has faltered.
China’s oil imports fell to an eight-month low in June – 5.7% lower than the month before and down by 11.5% year on year. Analysts are also concerned that the Chinese central bank will have to take growth-sapping measures in order to prevent further increases in inflation, currently officially 6.4%.Â
Just 18,000 jobs were created on net in the US last month, a disastrous figure given the country needs to creat 90,000 jobs each month just to cope with population growth.
