LONDON (Reuters) -- Oil fell more than $1, below $71 a barrel Thursday as further trouble in the U.S. subprime mortgage sector sent world stock markets tumbling and spilled over into oil and other commodities.
U.S. crude fell $1.38 to $70.77, more than 11 percent off its all-time high of $78.77 hit Aug. 1.
Other commodities also took a dive. Metals futures, often considered among the riskier securities, were down, with lead losing 5 percent and copper hitting its lowest since late June.
News BNP Paribas had become the latest bank to be hit by mortgage credit problems sent shivers through markets nervous that troubles in U.S. mortgages would spread globally.
A shortage of cash in money markets prompted the European Central Bank to add emergency liquidity.
"The fear is that all of this is going to have an impact on demand," said Chip Hodge, energy portfolio manager with John Hancock Financial Services.
Analysts noted flight from risk and strong demand for cash had forced short-term eurozone interest rates sharply higher. This, they said, was another sign of how much "stress" there was in the market and how much liquidation of risky assets.
"It seems that investors who need to finance their holdings of securities are not being able to draw on credit facilities and instead having to finance in the cash market," said Nick Parsons, head of market strategy at nabCapital.
Events on world markets overshadowed a bullish supply-demand picture for oil laid out in the latest fuel inventory data from top consumer the United States.
Figures released Wednesday showed U.S. crude and gasoline stocks fell sharply last week as crude imports slumped and refineries throttled back.
Gasoline inventories declined 1.7 million barrels, below the lower end of the average range, while crude stocks dropped for the fifth consecutive week.
"The inventory data was bullish but investors' interests were obviously muted," said David Moore of the Commonwealth Bank of Australia.
Unease over the health of the U.S. economy has knocked U.S. oil from an all-time high of $78.77 struck last Wednesday.
Analysts say further declines may be triggered by speculative funds moving out of energy and commodities to cover losses in equities and other markets.
U.S. crude fell $1.38 to $70.77, more than 11 percent off its all-time high of $78.77 hit Aug. 1.
Other commodities also took a dive. Metals futures, often considered among the riskier securities, were down, with lead losing 5 percent and copper hitting its lowest since late June.
News BNP Paribas had become the latest bank to be hit by mortgage credit problems sent shivers through markets nervous that troubles in U.S. mortgages would spread globally.
A shortage of cash in money markets prompted the European Central Bank to add emergency liquidity.
"The fear is that all of this is going to have an impact on demand," said Chip Hodge, energy portfolio manager with John Hancock Financial Services.
Analysts noted flight from risk and strong demand for cash had forced short-term eurozone interest rates sharply higher. This, they said, was another sign of how much "stress" there was in the market and how much liquidation of risky assets.
"It seems that investors who need to finance their holdings of securities are not being able to draw on credit facilities and instead having to finance in the cash market," said Nick Parsons, head of market strategy at nabCapital.
Events on world markets overshadowed a bullish supply-demand picture for oil laid out in the latest fuel inventory data from top consumer the United States.
Figures released Wednesday showed U.S. crude and gasoline stocks fell sharply last week as crude imports slumped and refineries throttled back.
Gasoline inventories declined 1.7 million barrels, below the lower end of the average range, while crude stocks dropped for the fifth consecutive week.
"The inventory data was bullish but investors' interests were obviously muted," said David Moore of the Commonwealth Bank of Australia.
Unease over the health of the U.S. economy has knocked U.S. oil from an all-time high of $78.77 struck last Wednesday.
Analysts say further declines may be triggered by speculative funds moving out of energy and commodities to cover losses in equities and other markets.
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