Oil prices dive below US$47 a barrel
Slower growth in the US and China sparks jitters
Renewed jitters over the prospects of slower growth in the world's two largest economies - the US and China - saw oil prices dive, markets sputter and commodities take a hit.
Crude has fallen below US$47 a barrel for the first time since the Organisation of Petroleum Exporting Countries (Opec) agreed to cut output in November. Prices have slumped 8 per cent since Wednesday to US$46.69 yesterday as Opec and other producers seemed to rule out deeper supply cuts to reduce a persistent glut.
After the cartel cut production, a 22 per cent bounce to a high of US$57.10 in January was erased partly as US crude output and shale production rose.
Analysts attributed the oil slump to high US commercial inventories, which now stand at 528 million barrels, close to their historic high.
Some stock markets in Asia fell in tandem with oil prices as analysts forecast further weakness amid signs that global US and China demand may not be strong enough to mop up the excess production.
Shanghai fell 0.64 per cent, Shenzhen lost 0.78 per cent, and Hong Kong fell 0.84 per cent.
Further dampening sentiment are weaker Chinese Purchasing Managers' Index numbers, and data showing US economic growth slowed to an annual rate of 0.7 per cent in the first quarter - the slowest in three years.
Iron ore and copper prices have been battered in recent days as weaknesses in the growth story emerge.
But Capital Economics' commodities economist Thomas Pugh believes the pessimism is overdone and still sees Brent crude oil recovering to US$60 by year end.
The Opec production cut agreement is set to expire at the end of June. At the next meeting on May 25, the cartel will decide whether to expand their agreement to lower crude production.
Mr Pugh believes Opec and Russia are likely to extend the cuts by at least three months.
CIMB economist Song Seng Wun said weak oil prices could hamper a recovery in Singapore's offshore marine sector.
"The price drop is a setback for a sector that is still waiting to see daylight. Every time prices drop or stay below US$50, we may see the sector's recovery pushed back, which puts pressure on companies that are heavily indebted.
"This sector contributes 10 per cent of Singapore's manufacturing activity and roughly 2 per cent of overall economic output."