* S&P revises U.S. ratings outlook from stable to negative
* Saudi confirms output cut, says market well supplied
* Coming up: U.S. May crude contract expiry on Tuesday
(Recasts, updates with settlement prices)
By Robert Gibbons
NEW YORK, April 18 (Reuters) - Oil fell sharply on Monday
after ratings agency S&P revised lower its U.S. credit outlook
to negative and OPEC ministers said high crude prices could
place a major strain on consumer countries' economies.
Although it affirmed the United States' "AAA" credit
rating, Standard & Poor's said there was a risk policymakers
may not reach agreement on how to address the country's
long-term fiscal pressures. []
"The U.S. debt situation got a reality check this morning
from the move by S&P," said John Kilduff, partner at Again
Capital in New York. "Only precious metals will be seen as
attractive in the aftermath of the outlook downgrade."
OPEC ministers voiced their concerns at a meeting in
Kuwait, where Nobuo Tanaka, executive director of the
International Energy Agency, reiterated his comment that if oil
prices remained around current levels, they could trigger a
recession similar to the one in 2008. []
Oil earlier felt pressure after Saudi Arabia on Sunday
confirmed it had cut output by more than 800,000 barrels per
day in March because of weak demand for its crude.
[]
Saudi Oil Minister Ali al-Naimi said a global economic
recovery remained "patchy", while his Kuwaiti counterpart added
that high oil prices threaten to become an economic burden for
many big consuming countries. []
Brent crude for June <LCOc1> fell $1.84 to settle at
$121.61 a barrel, having slipped to a session low of $121.
U.S. crude <CLc1> for May fell $2.54 to settle at $107.12,
after slipping as low as $106.54. The U.S. May crude contract
expires on Tuesday.
U.S. equities tumbled as the S&P action added to concerns
about the world's top economy. [] Equities and oil also felt
pressure from another Chinese bank reserve hike over the
weekend, the latest move to control inflation that could curb
demand growth. []
Most commodities fell, hit by S&P and concerns over Chinese
demand. One exception was gold -- seen as a store of value --
which shot to a record near $1,500 an ounce. []
[]
S&P said there is a 1-in-3 chance it could cut its
long-term credit rating on the United States within two years.
"This new warning, this time from S&P, highlights the need
for the U.S. to take better control of its fiscal destiny if it
is to avoid higher borrowing costs and maintain its central
role at the core of the global economy," Mohamed El-Erian,
chief executive at Pimco, which oversees $1.2 trillion in
assets, told Reuters.
WIDENING DEMAND CONCERNS
Oil investors already had been worried about China's
economic growth after another hike to Chinese banks' required
reserves on Sunday. The action was aimed at fighting excessive
liquidity and high inflation. []
Crude fell early last week after Goldman Sachs <GS.N> and
other key forecasters warned high oil prices were eroding
demand. It rebounded late in the week on encouraging U.S.
economic data and a steep fall in U.S. gasoline inventories.
The euro posted its biggest one-day decline since November
against the dollar as concerns increased that Greece will be
forced to restructure its debt and amid growing anti-aid
sentiment in Europe. []
The dollar index <.DXY>, measuring the greenback against a
basket of currencies, strengthened.
A stronger dollar can pressure oil prices by making
dollar-denominated crude more expensive for consumers using
other currencies and by drawing investment to foreign exchange
markets for better returns.
AFRICA/MIDDLE EAST SUPPLY THREATS
Investors remain worried about lingering threats to oil
supply that helped spark prices to recent, 32-month peaks.
Forces loyal to Muammar Gaddafi bombarded Misrata, Libya's
third-largest city, and a chartered ship evacuated nearly 1,000
foreign workers and wounded Libyans. []
Clashes broke out in Yemen, wounding at least 15 people,
and thousands demanded the overthrow of Syrian President Bashar
al-Assad in escalating unrest. [] []
Oil investors also eyed Nigeria, where rioting took place
in northern cities after a contentious election, according to
the Nigerian Red Cross. []
(Additional reporting by Claire Milhench and Alex Lawler in
London and Francis Kan in Singapore; Editing by Dale Hudson)
