By Herbert Lash
NEW YORK (Reuters) – Crude oil tumbled on Friday, knocking down both energy-related shares and currencies after OPEC’s decision a day earlier not to cut output reinforced prospects of a worldwide oil supply glut.
The dollar mostly strengthened following the decision by the Organization of Petroleum Exporting Countries on Thursday, a move that slammed commodity currencies like the Norwegian crown, which fell to five-year lows against the greenback and the euro.
The ruble weakened to more than 50 to the dollar in late trade, setting a new all-time low. The ruble has lost a third of its value this year as Western sanctions imposed due to the Ukraine crisis and falling oil weigh on the Russian economy.
Euro zone government bond yields held near record lows as declining energy prices cut into consumer price growth across the bloc and raised the chances of more stimulus from the European Central Bank on increased deflation fears.
A rout in U.S. and European energy shares weighed on equity markets. But other sectors edged higher, lifting Wall Street’s Dow industrials and the Nasdaq, while several leading indexes in Europe pared losses in late trade to close slightly higher.
U.S. crude, or West Texas Intermediate, fell more than 10 percent and Brent crude fell another 3.3 percent after a 6.7 percent slide on Thursday. The sell-off since OPEC’s decision amounts to about $67 billion in lost market value, Reuters estimates.
The slide could deepen when traders and investors return after Thursday’s U.S. holiday and Friday’s shortened session.
“There’s a notion that yesterday’s selling was overdone, but not everyone is fully back to work yet after Thanksgiving,” said John Kilduff, partner at energy hedge fund Again Capital in New York. “WTI could certainly be down a couple of dollars more next week, and test newer lows from there.”
Brent fell $2.43 to settle at $70.15 a barrel, lows last seen in May 2010, while U.S. crude settled down $7.54 to $66.15 a barrel.
The European oil and gas sector fell 3.5 percent, while the S&P Energy index fell 6.3 percent. The energy index in Europe has lost $240 billion in market value since late June, more than the market cap of Royal Dutch Shell Plc, Europe’s biggest oil major, Thomson Reuters data shows.
The pan-European FTSEurofirst 300 rose 0.02 percent to close at 1,392.70, while MSCI’s all-country world equity index fell 0.4 percent to 425.55.
Stocks on Wall Street ended mixed in light trading.
The Dow Jones industrial average ended up 0.49 point, or 0 percent, at 17,828.24. The S&P 500 fell 5.27 points, or 0.25 percent, to 2,067.56 and the Nasdaq Composite added 4.31 points, or 0.09 percent, to 4,791.63.
The drop in oil sparked a sharp decline in inflation expectations as measured by “breakevens,” with 10-year TIPs at their lowest since October 2011 at about 1.8 percent.
In fed fund futures, expectations of the Federal Reserve raising interest rates by September fell to below 50 percent.
German 10-year yields – the benchmark for euro zone borrowing – were down a fraction at 0.70 percent.
Yields on benchmark 10-year U.S. Treasuries fell to 2.1728 percent, with the price up 17/32.
The dollar gained 0.84 percent to 118.67 yen, while the dollar index, which measures the greenback against a basket of major currencies, gained 0.79 percent to 88.295.
The euro fell 0.18 percent to $1.2444.
(Reporting by Herbert Lash; Editing by Jonathan Oatis and Dan Grebler)