Acadiana Business

Credit downgrade prompts plummet in oil prices

by Heather Miller

Standard and Poor's blow to the U.S. credit rating brings oil prices to their lowest in eight months.

Oil is trading at $83 a barrel as of Monday morning, down more than $3 a barrel since Friday's news of the country's credit rating being downgraded.

Forbes reports that the nation's credit score, lowered for the first time in history, has investors worried the move will stifle an already slow economic recovery.

And though the credit rating brings fear of another U.S. recession, some investment firms are encouraging crude investments and say the world economy will grow enough to encourage oil trading:

Crude traders often look to stock prices as a barometer of overall investor confidence, and oil prices were swept down Monday by a major sell-off across Asian stock markets, followed by falling indices in Europe, as well.

"Further losses can be expected in the near term, as financial investors should reduce risk positions on the back of high risk aversion and the uncertain economic outlook," said analysts at Commerzbank in Frankfurt.

Despite growing fears of a recession in the U.S., some analysts expect global economic growth to remain robust, supporting oil prices.

"We maintain that commodity markets will continue to tighten as long as global economic growth remains broadly positive and the emerging market economies in particular continue to perform," Goldman Sachs said in a report. "We expect that the market will continue to tighten to critical levels by 2012, pushing oil prices substantially higher to restrain demand."

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