Oil prices dropped to a one month low as a bleak growth outlook by the US Federal Reserve in its policy meeting statement yesterday said there are “downside risks to the economy”. This dampened market sentiment as concerns are mounting that slowing growth will result in lower demand for oil. This view was made worse after disappointing manufacturing data from China, which is the world’s second largest economy. PMI data from Europe were also weak.
Global equity markets also tumbled today which further weighed on commodities as investors headed into safer havens such as the more liquid dollar.
U.S. crude oil fell to as low as $79.65 a barrel by 2:30pm in New York, the lowest since August 19. Crude opened the day in Asia at $84.87.
The drop in oil came as part of a wider sell-off in commodities, with benchmark industrial metal copper , which is viewed by some as a key indicator of future economic conditions, hitting a one-year low.
The Reuters-Jefferies CRB index, a 19-commodity global benchmark for the asset class, plunged more than 4 percent.
Meanwhile gold, which hit record highs recently as demand for its safe haven status is high during economic uncertainty, fell to $,1720 today as investors turned instead to the U.S. dollar.