Crude prices plunged in Asian trade Tuesday as traders took profit amid fears that high oil prices would stall a fragile US economic recovery, analysts said.
New York’s main West Texas Intermediate (WTI) futures contract, light sweet crude for delivery in May, dived $1.49 to $108.43 per barrel.
Brent North Sea crude for May delivery slipped $1.44 to $122.54.
Crude traders were engaged in “profit-taking after the highs we saw on Monday,” said Ong Yi Ling, investment analyst with Phillip Futures in Singapore.
The benchmark WTI had on Monday brushed $113.46 — a peak last seen in September 2008 — before retreating, and ended the day at $109.92, down $2.87 from Friday’s closing level.
Analysts fear that rocketing crude prices would undermine the delicate recovery in the United States, the world’s biggest economy.
“There is the fear that of oil prices trending higher, that demand will fall and the US economic recovery will be impacted,” Ong said.
The US is the world’s biggest oil consumer according to the International Energy Agency, therefore the state of its economy is a major factor which has a significant impact on crude markets.
The International Monetary Fund (IMF) also said that while the global economy is firmly on the mend in 2011, it faces rising headwinds, particularly from higher oil prices.
“The key downside risk to growth relates to the potential for oil prices to surprise further on the upside because of supply disruptions,” the IMF warned in its latest world economic forecasts released Monday.
“New downside risks are building on account of commodity prices, notably for oil, and, relatedly, geopolitical uncertainty, as well as overheating and booming asset markets in emerging market economies,” it said.
Surging oil prices have sparked fears of a return to the record levels above $147 seen in 2008, when high food and commodity prices sparked political unrest in some countries.
The IMF said its forecast for the global economy to expand 4.4 percent this year from 5.0 percent last year assumed an average oil price of $107 a barrel in 2011, after $79 in 2010.
It projected the US economy to grow a modest 2.8 percent this year.