Oil plummets on US negative credit outlook

April 19th, 2011 - 3:31 am ICT by IANS  

New York, April 19 (IANS) US crude oil price dropped sharply Monday after Saudi Arabia reported a drop in its oil output in March and Standard & Poor’s (S&P;) cut the US credit outlook to negative, Xinhua reported.

The S&P; left its AAA rating for US credit unchanged, but lowered its outlook on US debt from “stable” to “negative”, citing “material risks” that US policymakers might fail to deal with the rising budget deficits and debt.

The New York-based rating agency said in a report Monday: “If an agreement is not reached and meaningful implementation does not begin, this would in our view render the US fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”

Meanwhile, Saudi Arabia confirmed Sunday it had cut output by more than 800,000 barrels per day in March as it thought the market was oversupplied, because the high oil price has hurt the demand.

Saudi Arabia is one of the major oil producers in the Organisation of the Petroleum Exporting Countries (OPEC).

Besides, oil investors worried about China’s economic growth after the world’s second largest economy tightened its monetary policy Sunday by raising the banks’ reserve ratio by 50 basis points to fight high inflation.

Light, sweet crude for May delivery lost $2.54, or 2.32 percent, to settle at $107.12 a barrel on the New York Mercantile Exchange. In London, Brent crude for June delivery also plunged and last traded below $122 a barrel.

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