Oil Endures Savage Beating

Amid growing fears regarding just how much the global economy is slowing, oil futures plunged on Thursday. NYMEX-traded crude plunged $3.25 or 4% to $78.20 per barrel marking the first settlement below $80 since October 2011 for West Texas Intermediate. In London, Brent crude gave up $2.99, or 3.3%, to settle at $89.56 a barrel. That is the first time the global benchmark contract has settled below $90 since December 2010. As investors fled riskier assets such as commodities and equities, the dollar benefited. The PowerShares DB US Dollar Index Bullish (NYSE: UUP) surged 1.1% today on volume that was well above the daily average.

Oil was clearly done in by week foreign and domestic economic data. Overnight, the flash reading on the China Purchasing Managers Index indicated another month of contraction in the world's second-largest economy. U.S. economic data points didn't give investors any reason to cheer, either.

In economic news, the National Association of Realtors said existing home sales fell 1.5% in May to a seasonally adjusted annual rate of 4.55 million. That's well below the rate of 6 million economists say is needed to consider the housing market healthy. Initial claims for jobless benefits fell by 2,000 to 387,000 last week, but that's still above the 385,000 new claims economists expected. The less volatile four-week moving average jumped by 3,500 to 386,250, the highest level in seven months.

The Philadelphia Federal Reserve Bank said its business outlook survey fell to -16.6 from -5.8 in May. The June reading is the lowest level in 10 months. Economists expected a June reading of zero.

With both WTI and Brent violating psychologically important price areas, traders have now turned to the business of speculating just how much further crude futures decline. With the demand waning and economic data points weakening, the answer is much further. A strong dollar clearly does not help matters and some traders have said WTI futures could fall as low as $70-$72 before finding next support.

With U.S. equities enduring their worst day in three weeks, the Dow Jones Industrial Average plunged 250 points. Translation: It's not surprising that Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) each dropped more than 3.3%. Chesapeake Energy (NYSE: CHK) fell nearly 5% despite announcing the appointment of former ConocoPhillips (NYSE: COP) Chairman Archie Dunham as chairman.

Thanks to growing concern about oil demand and still depressed natural gas prices, oil services names were battered. Rig counts are forecast to plummet in the coming months, indicating demand for services will wane as well. The Market Vectors Oil Services ETF (NYSE: OIH) plunged 5% today and is now within earshot of its 52-week low.