Oil prices also fell victim of the U.S. credit rating downgrade by Standard and Poor’s. Crude oil for September delivery fell to an eight-month low of $82.51 a barrel in the New York trading session today. This is the lowest level since November 2010. Crude opened Asia down at $85.05 from Friday’s close of $87.06.
Over the weekend, the U.S. lost its triple A rating after Standard and Poor’s cut its rating by one level to AA+. This caused concern in markets that the world’s largest economy is heading into a recession, and began a massive sell off in risk currencies as well as oil, due to the fact that the U.S. is a major consumer of crude oil. If the U.S. economy is slowing down, then a domino effect will occur because if manufacturing slows down, the demand for oil will fall.
“The U.S. downgrade is pushing equities and oil lower, and we might see a further slump until the government announces actions to boost liquidity such as a new round of quantitative easing,” said Eugen Weinberg, an analyst at Commerzbank AG. “The European Central Bank buying Italian and Spanish bonds will increase confidence in markets, helping them recover.”