Oil plunges below $82

SINGAPORE (AP) — Oil prices plunged below $82 a barrel yesterday in Asia, extending big losses on expectations that disruption to air travel from the Icelandic volcano will undermine the global economic recovery and crude demand.

Benchmark crude for May delivery was down $1.38 to $81.86 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

A huge cloud of volcanic ash has shut down air traffic in most of Europe for four days, scuttling travel plans and freight services that could end up costing billions of dollars.

At the very least, traders say the volcano crisis will lower demand from airlines for jet fuel.

“The market had underestimated the impact of the volcano,” said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. “There’s still a lot of uncertainty about how much this will affect the overall economy.”

Oil fell $2.27 to settle at $83.24 a barrel on Friday after the Securities and Exchange Commission said Goldman Sachs & Co. defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2008.

Investors speculated that Goldman may have to liquidate some positions in crude to pay for penalties if found guilty.

“I think the whole market sentiment has switched to less optimistic,” Chu said. “Things are pointing more bearish now.”

Crude had jumped to an 18-month high above $87 a barrel earlier this month from $69 in early February.

In other Nymex trading in May contracts, heating oil fell 3.24 cents to $2.185 a gallon, and gasoline dropped 2.70 cents to $2.250 a gallon. Natural gas was steady at $4.044 per 1,000 cubic feet.

In London, Brent crude’s June contract was down $1.12 at $84.87 on the ICE futures exchange.