Oil prices trading at $70 mark amid stock market falls

Oil prices are trading under $70 mark on Wednesday as global stock markets fall amid European and Korean tensions hit commodity prices.

WTI Light crude oil futures for July delivery dropped to $68.75 on the NYMEX, while in London yesterday, Brent crude oil futures dropped as low as $68.15 on the ICE Futures Exchange.

Stock markets around the world fell Tuesday on worries that Europe’s problems will slow global growth and demand for crude and petrol.

The strains in Europe’s sovereign debt markets are nearing levels that forced EU leaders to launch their “shock and awe” rescue package. “If a $1 trillion (£700bn) bail-out did not finally turn sentiment, I struggle to see what can,” said Tim Ash, an economist at RBS.

Traders also moved into the US dollar and safer investments on reports that North Korean leader Kim Jong Il ordered his military to combat alert after South Korea blamed the North for sinking a South Korean warship two months ago.

Oil prices have been volatile for months, with swings of $10 to $15 per barrel in the last month alone. Traders wonder if crude oil prices have reached a bottom and will go back up.

“Obviously the European situation has been the ongoing story, but their bank stocks have fallen again today, and that is reducing confidence that this economic crisis is going to go away any time soon. It also increases the likelihood that demand for crude oil will be aversely affected,” said Phil Flynn, senior market analyst with PFG Best.

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