* Fears of new credit crunch in Europe builds
* Anxiety up on massive sell off in Wall Street
* Coming up: U.S. non-farm payrolls, unemployment; 1230 GMT
* For a technical view, click: []
By Florence Tan
SINGAPORE, May 7 (Reuters) - Oil edged up above $77 a
barrel on Friday on the back of a weaker dollar, recovering
from a 4 percent slide the previous day, caused by a massive
sell-off on Wall Street and fears of a looming new credit
crunch in Europe.
A suspected trading glitch and jitters over the European
debt crisis caused stocks in the United States to plunge 9
percent in the last two hours of trading on Thursday, its
biggest single-day drop ever.
Investors fled into the safe havens of the U.S. dollar and
Japanese yen as the European Central Bank on Thursday offered
no new measures to ease the Greek debt crisis. []
U.S. crude for June delivery <CLc1> rose 20 cents to $77.31
a barrel by 0308 GMT, largely on the back of the softer dollar
and on bargain hunting. The contract has fallen more than 10
percent this week, its worst week since the start of 2009.
London Brent crude <LCOc1> gained 35 cents to $80.18 a
barrel.
On Friday, the euro extended gains above $1.27 on Friday as
market players continued to cover short positions, helped by
news that Group of Seven (G7) finance ministers will discuss
efforts to get aid to debt-stricken Greece later in the day.
[]
The dollar fell 0.15 percent against a basket of currencies
<.DXY>, prompting holders of other currencies to buy the
dollar-denominated oil.
"It's certainly been three very steep days of decline. The
spike in risk aversion is comparable in some way to what we saw
in 2008," said Toby Hassall, head of research at CWA Global
Markets in Australia.
The global financial crisis in 2008 sent oil prices
plunging from $147 to around $30 within five months.
The Nasdaq launched a probe into possible trading errors
that wiped off nearly $1 trillion in U.S. equity values before
prices clawed back much of their losses. []
The VIX <.VIX>, Wall Street's so-called fear gauge, soared
31.7 percent in its largest percentage jump since September
2008 -- just after the collapse of Lehman Brothers ushered in
the darkest days of the biggest financial crisis since the
Great Depression.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a chart of oil's correlation with risk aversion, see:
http://graphics.thomsonreuters.com/gfx/NT_20100705110504.jpg
For a technical chart, see:
http://graphics.thomsonreuters.com/gfx/WT_20100705085001.jpg
For graphic on oil-dollar correlation, click on:
http://graphics.thomsonreuters.com/gfx/RSW_20100705104744.jpg
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MARKETS ROUT
The dive on Wall Street sent Asian stocks sliding, with the
Nikkei average <> down more than 4 percent to a two-month
low, while Hong Kong <> opened 2 percent lower. []
Gold eased on Friday as some investors sold after it rose
toward all-time highs a day ago on the euro-zone debt woes,
while base metals dropped around 1 percent in London. []
Confidence in economic recovery has certainly been shaken
on a possible financial crisis in Europe, Hassall said.
"The euro has been under tremendous amount of pressure as a
result of a lack of confidence in the solution to European
debt," he said.
"As long as those concerns are there, the pressure will
continue."
Oil is also under pressure from high inventories in top
consumer the United States.
Industry data provider Genscape reported that oil stocks at
NYMEX's Cushing, Oklahoma, delivery hub are expected to rise by
another 990,795 barrels to a record of 37.8 million barrels in
the week to May 4. []
"We're still seeing oversupply in the U.S. market," Hassall
said, even though demand from emerging economies, particularly
China, is offering some support to oil prices.
The market will be watching for U.S. non-farm payroll and
unemployment data due later on Friday.
"We're expecting an encouraging piece of data tonight which
may provide some support to Wall Street and crude prices, but
it's certainly hard to ignore events unfolding in Europe,"
Hassall said.
(Editing by Ramthan Hussain) (florence.tan@thomsonreuters.com;
+ 65 6870 3497; Reuters messaging:
florence.tan.thomsonreuters.com@reuters.net))
