Oil price drops $2 to $86 per barrel

Oil fell $2 a barrel to below $86 on Friday, retreating from a 25-month high reached in the previous session, as concern about Irish debt boosted the dollar and spurred a broad retreat from riskier assets.

U.S. crude was down $1.95 a barrel at $85.86 as of 0830 GMT, after touching an intra-day peak of $88.63 on Thursday, the highest since October 2008. ICE Brent slid $1.73 to $87.08.

Attention in the oil market refocused on risk aversion and macroeconomic concerns at the end of a week when prices were dominated by crude fundamentals — Chinese demand at a record and U.S. inventories plunging.

The euro fell broadly on Friday, hitting a two-month low versus the Japanese yen and a six-week low versus the dollar on worries over Ireland’s public finances and as positions in riskier assets were pared back.

“It’s just a correction after the big rebound the euro had against the U.S. dollar,” said Ken Hasegawa, a commodity derivatives manager at Japan’s Newedge brokerage.

“The big issue is the worries about Ireland’s economy. It seems to be worse than expected, and that is the reason why the euro is falling. In addition, technically some selling orders have been triggered across all commodities.”

Asian stocks were broadly lower, led by a 5 percent drop in the Shanghai composite index .SSEC on talk of interest rate increases. European equities lost ground in early trade.

Oil had rallied for most of the past two weeks, partly on a plan by the U.S. Federal Reserve to buy $600 billion in Treasury bonds to help speed economic growth.
Source: Reuters