Oil prices rose above $74 a barrel in thin trade on Monday in thin holiday trade as worries about euro zone economic stability fueled the worst monthly loss for the commodity since December 2008. U.S. light, sweet crude for July delivery rose 42 cents to $74.39 by 0249 GMT, after settling down 58 cents on Friday, when a downgrade of Spain's credit ratings and disappointing U.S. economic data fuelled investor caution about riskier assets like oil. Front-month crude fell $12.18, or 14.1 percent in the month of May, the biggest monthly percentage loss since December, 2008, when prices fell 18.1 percent. London Brent crude rose 25 cents to $74.27 a barrel. Front-month Brent crude was down $13.42, or 15.4 percent for the month, the biggest monthly percentage decline since November, 2008. Trading was curtailed on Monday with markets in the U.S. and U.K. closed on Monday for public holidays.
Fitch Ratings downgraded Spain's sovereign credit rating by one notch on Friday, saying the country's economic recovery will be "more muted" than government forecasts due to austerity measures. "It's not a shocking thing any more. People get pretty good idea because in general the feeling is that even the $1 trillion rescue package is not going to solve the problem. It's just confirming what they already know," said Clarence Chu, a trader at Hudson Capital in Singapore. "We expect the market to be very quiet with very low volume, unless there is some breaking news," Chu said. "The oil prices usually move in a tight range during long holidays." The euro stabilized against the dollar on Monday but remained under downward pressure from the Spain credit downgrade.
A Reuters survey on Friday showed the Organization of Petroleum Exporting Countries, or OPEC, oil supplies to the market rose in May to the highest in 17 months, suggesting a price slide has yet to spur closer adherence to agreed output targets. Nawal al-Fuzaia, Kuwait's national representative to OPEC, said crude oil prices could fall to $60 a barrel due to global economic instability. In a sign of bearish sentiment for oil prices, money managers cut net crude oil long positions on the New York Mercantile Exchange by 12,558 positions in the week to May 25, Commodity Futures Trading Commission data showed on Friday.
Commodities in May had their steepest monthly decline in 18 months, with a key sector index down more than 8 percent as the European crisis roiled energy, metals and agricultural markets, the Reuters-Jefferies CRB index showed. Investors are also looking ahead to demand figures as the U.S. driving season, when motor fuel demand reaches its annual peak, started at the weekend and runs until Labor Day in early September.
