Oil prices slumped this evening after ratings agency Standard & Poor's cut the outlook on US sovereign debt to 'negative' and as key industry bodies expressed concern about the effect of high energy costs on demand.
US crude crude fell $2.60 to $107.06 a barrel in New York. In London, Brent crude lost $2.23 to $121.22.
Prices, which had already been falling on profit-taking, accelerated their losses after S&P issued its first warning on US sovereign debt, citing the country's looming debt and fiscal deficit. The US is the world's biggest consumer of oil.
The news sent US stock markets sharply lower, while the price of gold struck a record high just short of $1,500 an ounce in London as the precious metal profited from its safe-haven status. Gold reached $1,497.23 an ounce this afternoon.
Earlier, OPEC secretary general Abdullah El-Badri said the cartel was 'concerned' by high crude prices. He was speaking ahead of a roundtable meeting for Asian energy ministers who went on to discuss the impact of high oil prices on the economy.
Badri's comments also came after the head of the International Energy Agency, Nobua Tanaka, said oil prices were 'very high' and that his group was alarmed that this could undermine economic growth and demand.
In response, Gulf oil producers today assured consumers of sufficient supplies to help stem rises in prices fuelled by sweeping unrest in the Middle East and speculative trading.
'Saudi Arabia's position in the world oil market is based on its commitment to maintaining spare capacity for the sake of price and market stability,' Saudi Oil Minister Ali al-Naimi told the roundtable meeting. Naimi said the kingdom had spare capacity of more than 3.5 million barrels per day which it could use whenever the need arises.
