After starting the week on a firmer note, oil prices fell sharply toward the end of the week in a general market sell-off as investors sought the dollar as a safe haven amid worries about European Union economies.
Debt problems that have plagued Greece are now spreading to Portugal and Spain, driving the euro down temporarily below $1.36 and bringing the dollar to an 8-month high. Because oil and other commodities are priced in dollars, gains in the U.S. currency usually translate into declines in oil prices.
Even a decline in the U.S. jobless rate below 10% on Friday could not stop the downward trend in commodities.
Some analysts were predicting that crude oil futures, which crashed through the longtime support level of $72 dollars a barrel to dip briefly below $70 for West Texas Intermediate in Friday afternoon trading, were sliding downward into a new trading range of $65 to $72 a barrel, after oscillating between $72 and $80 the past several weeks. Crude oil, which settled just above $71 a barrel on Friday, has dropped nearly 15% since hitting its 15-month high just above $83 on Jan. 6.
Energy news also depressed prices. Crude oil inventories in the U.S. rose 2.3 million barrels in the week, several times what economists had been expecting. In Asia, China is importing more crude than it needs, analysts said, apparently with intention of exporting more refined products, which would weigh on the global market.
Earlier in the week, positive manufacturing data from several economies had driven up energy prices to above $77 a barrel as market participants saw signs of stronger economic recovery. But that gave way to the concerns about a debt contagion in Europe and the impact of austerity measures to bring debt under control.
The new scramble into the dollar as a safe haven was evident in the sharp drop in gold prices, which fell more than 4% on Thursday, and fell further on Friday to about $1,050 an ounce. Gold had risen in the past few months as a safe haven from the dollar.
Now cash - dollar cash - seems to be the preferred safe haven for many investors. The Dow Jones Industrial Average, which spent most of the day well below 10,000, recovered in a late rally to close above that threshold with a small gain.