Oil prices slump after S&P warns on US debt

NEW YORK—Oil prices slumped Monday after ratings agency Standard & Poor’s cut its US outlook to “negative” and as key industry bodies expressed concern about the impact of high energy costs on demand.

S&P’s move added pressure on Washington to slice its budgets and/or raise taxes, both of which would dim the picture for economic growth and oil consumption.

It came after OPEC secretary general Abdullah El-Badri said the petroleum cartel was “concerned” by high crude prices.

In New York trade, the price of the Nymex benchmark WTI light sweet crude for May delivery fell $2.54 a barrel to $107.12 from its close Friday.

In London, the main Brent North Sea crude contract for May lost $1.84 to $121.61 a barrel.

Pushing prices lower was S&P’s unprecedented cut in its US rating outlook; more turmoil in the eurozone economies; China’s newest efforts to put a chill on its overheating economy; and OPEC’s forecast that Japan’s quake-shocked economy will contract slightly this year.

Also bearish were the worries over high prices expressed at a Kuwait meeting between the Organization of Petroleum Exporting Countries and Asian energy ministers in Kuwait.

Badri said OPEC saw a $15-20 premium risk in oil at current prices, and called for introducing “some regulations” to curb speculation.

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.

Saudi Oil Minister Ali al-Naimi, representing the world’s largest oil supplier, said they were focused on “price and market stability.”

Kuwaiti Oil Minister Sheikh Ahmad Abdullah al-Sabah said that the volatility of prices “poses a significant dilemma.”

S&P “has caused consternation in almost every asset class from currencies to commodities to indices,” said Ian O’Sullivan, analyst at trading group Spread Co.