NEW YORK – Oil dropped more than $2 a barrel Friday, joining a slump across the commodities markets amid concern higher interest rates could slow economic growth and cool demand.
Prices were also pressured by news Oman's only oil terminal resumed operations Friday after a three-day closure caused by Cyclone Gonu, and after U.S. government data earlier in the week showed an unexpected increase in gasoline stockpiles.
London Brent crude, seen as more representative of the global market, settled down $2.62 at $68.60 a barrel at 1815 GMT. U.S. crude fell $2.17 to $64.76 a barrel.
"This appears to be part of a wider sell-off across the commodities," said Kyle Cooper of IAF Investors. "We're seeing a liquidation in gold and silver as well. People are choosing to move from assets into the safe harbor of cash."
Prices for gold slumped to a three-month low Friday, while silver and platinum also fell. Stocks, which had been hard hit by concerns over interest rates in Europe and uncertainty over the cost of lending in the United States earlier in the week, recovered Friday.
"Both these groups (metals and equities) have sold off sharply of late, unnerved by prospects of rising interest rates and the implications that this could have on economic growth," Edward Meir wrote in his Man Energy Daily Report.
Oil began to slide early on Friday after Cyclone Gonu lost strength after slamming into Oman and Iran.
Oman's Mina al-Fahal, the country's only terminal for its 650,000 barrels per day (bpd) of crude exports, resumed operations on Friday, a shipping source said.
Dealers added that rising gasoline stockpiles in the United States were also pushing down prices. The U.S. Energy Information Administration said on Wednesday gasoline supplies rose last week by 3.5 million barrels, the fifth consecutive weekly build.
"Clearly the refinery issue was not encouraging to the bears, but if you're still building gasoline stockpiles when refineries are struggling, there's not much of a supply problem," said IAF's Cooper.
Prices have been underpinned by OPEC's reluctance to increase output.
Brent crude almost matched the $71.80 high hit in late May after the president of the Organization of the Petroleum Exporting Countries said on Thursday there was no need for an emergency meeting.
Consumers have been urging the group to reconsider its current production ceiling.
The market was also briefly ruffled on Thursday by a report Turkey was launching a major incursion into oil-producing northern Iraq.
A military source said troops had conducted a limited raid, but Turkey denied it was on a major scale.