NEW YORK (Reuters) - U.S. oil prices fell 4 percent in volatile trading on Thursday, notching their worst three-day run in 15 months on growing fears that the Greek debt crisis could engulf other economies.
Oil recouped some of the more than $5 a barrel losses it suffered after a sudden mid-afternoon rout said to have been caused by an errant stock market trade, but crude still ended the day at its lowest since mid-February in near-record volume as the dollar rose and other risk assets retreated.
As traders regained their poise following a half-hour of unprecedented volatility across financial markets, including a near 10 percent dive in major U.S. stock market indices, the focus returned to the anxious situation in Europe.
“We had this huge appetite going for risk assets ever since March of 2009, and it has been fading, starting slowly a few days ago and then really taking off this afternoon,” said Peter Beutel, Cameron Hanover, New Canaan, Connecticut.
After plunging to an intraday low of $74.58 a barrel when stock markets collapsed and the dollar rallied around mid-afternoon, June crude was trading down $2.87 at $77.11 by 4:27 p.m. (2027 GMT).
June crude’s volume on the day hit 574,000 contracts by 4 p.m. EDT, the second highest on record for front-month crude on after the 596,000 peak hit on February 5. Total market activity neared 1.1 million lots, the highest since mid-April but off the record over 1.4 million.
London Brent crude fell $3.08 to $79.53.
Market sources said an errant trade by a person at a Wall Street bank may have triggered the cross-market sell-off, and the Nasdaq OMX Group said it was investigating potentially erroneous transactions involving multiple securities.
Oil has fallen more than 10 percent this week, its worst week since the start of 2009, punished both by anxiety over the euro zone as well as data showing rising U.S. crude inventories as a demand rebound fails to materialize.
Even after Greek lawmakers approved an austerity bill that would open the door to a record bailout, doubts persisted over Greece’s ability to carry out tough spending cuts in return for a 110 billion euro aid package from the European Union and the International Monetary Fund.
And the euro tumbled to a 14-month low versus the dollar after the European Central Bank’s decision to leave monetary policy unchanged failed to convince investors that it will be able to prevent a debt crisis in the euro zone.
The crisis of confidence in euro-zone economies and the latest U.S. economic data stoked further worries that global energy demand could be hard hit, just as signs of recovery are emerging, particularly in the United States, the world’s largest energy consumer.
“The crumbling euro is making a very blatant statement about the concern investors have about the (European) Union’s economic prospects ... more immediately, how is energy demand going to expend,” said Mike Fitzpatrick, vice president for energy at MF Global in New York.
Fundamentals also continued to move against the market, with industry data provider Genscape reporting that oil inventories at the NYMEX’ Cushing, Oklahoma, delivery hub rising by another 990,795 barrels to a record 37.8 million barrels in the week to May 4.
On Friday, dealers are awaiting pivotal U.S. jobs data expected to show that nonfarm payrolls rose for a second month, providing a bit more evidence of an economic recovery that should help revive oil consumption.
Additional reporting by Robert Gibbons and Joshua Schneyer in New York, Joe Brock in London, and Florence Tan in Singapore; editing by Marguerita Choy