Oil drops 4.5 per cent on Japan, Mideast clashes eyed

NEW YORK: Brent crude prices tumbled 4.5 percent on Tuesday, the biggest drop in 13 months, as Japan's escalating nuclear crisis sparked risk aversion across markets, outweighing concerns about turm oil in Bahrain and Libya.
U.S. crude prices fell nearly 4 percent as oil traders braced for an extended period of weak demand from the world's No. 3 consumer after an explosion at a quake-crippled nuclear power plant sent radiation wafting into Tokyo.
Oil markets, which shot to near $120 a barrel in February on protests in North Africa and the Middle East, also kept a close eye on violent clashes in Bahrain and fighting in Libya that saw further gains against rebels by forces loyal to Muammar Gaddafi's government.
Brent crude futures for April delivery settled at $108.52 a barrel, dropping $5.15 or 4.5 percent, its biggest percentage drop since February 4, 2010. During the session, it fell as low as $107.88, its lowest since February 23.
U.S. crude futures for April delivery fell $4.01 to settle at $97.18 a barrel. The intraday low of $96.71 was the lowest price since March 1, when prices fell to $96.31.
"It looks like the Japanese economy may be affected for a longer period than was thought last week," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Total U.S. crude trading volume rebounded to 803,435 lots, up from about 566,000 on Monday, but still 10 percent below the 30-day average, according to Reuters data.
Risk aversion also hit commodities and stock markets, though U.S. equities recovered a bit after a U.S. Federal Reserve statement said the U.S. recovery was gaining traction and rising inflation pressures should prove transitory.
MARKETS BUFFETED BY JAPAN'S WOES
The market stayed focused on Japan, where two more blasts at the Daiichi plant in Fukushima facility blew a hole in a building housing a reactor and cooling pool for spent fuel rods. The unfolding crisis spooked investors, who fled riskier assets and parked money in government debt.
Analysts expect Japan's crude oil demand to decline in the short term due to shut refineries and stalled economic activity. An early view that distillate imports would spike to substitute nuclear plant generation with oil-fired power seemed to lose influence in the markets on Tuesday.
U.S. benchmark heating oil futures slumped more than 3.5 percent and the crack spread, or profit margin for refiners, fell $1.29 to $26.20 a barrel in post-settlement trading. Both posted gains on Monday.
Ahead of a seasonal specification shift from winter grade fuel, U.S. gasoline futures tumbled 5.3 percent, with the crack spread sliding $2.83 to $20.31 a barrel.
High retail pump prices kept U.S. gasoline demand lower last week versus the year-ago period, though pleasant weather pushed demand up versus the previous week, according to a MasterCard report.

(Source: http://economictimes.indiatimes.com/markets/commodities/oil-drops-45-per-cent-on-japan-mideast-clashes-eyed/articleshow/7715415.cms)