Oil prices lower as Germany “switches off financial lights”

Oil prices open trading on Wednesday lower amid a decision by Germany yesterday to ban naked short selling of key bank stocks may “switch off Europe’s financial lights”.

US Light crude oil futures for June delivery was trading to $68.60 a barrel at midday Singapore time on the NYMEX, while in London, Brent crude oil futures were trading down at $74.45 on the ICE Futures Exchange.

Germany banned risky bets on bonds, stocks and credit protection, stunning investors and setting euro zone markets up for a rough ride on Wednesday amid fears Berlin’s attack on speculation will backfire.

“Germany just switched off the financial lights in Europe,” said a senior forex trader at a European bank in Singapore.

“Germany’s announcement … dented risk appetite as it raises the question as to whether the German regulator knows something the market doesn’t,” Rabobank said in a note. “If there is a secret here, it can’t possibly be a positive one.”

Crude oil prices have fallen more than 20 per cent since May 2010 on investor concern that efforts to contain Europe’s debt crisis could fail and deep government spending cuts will hurt economic growth and oil demand.

Many view investing in oil now favourable to buying into gold, however with the current issues facing Europe, it maybe better to sit on the fence and see what plays out.

Tags:  bank, Europe, financial, Germany, oil, oil prices, prices, selling, short, stocks, trading