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Crude prices fall on poor US job and retail numbers
Source: Agencies |
January 9, 2009, Friday
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Online Edition
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CRUDE futures retreated for a second consecutive day as the US government released more disheartening economic data and report suggesting further erosion of demand for energy.
Light, sweet crude for February delivery fell US$93 cents to settle at US$41.70 a barrel on the New York Mercantile Exchange. On Wednesday, prices tumbled more than 12 percent in the largest single-day percentage decline since September 2001.
A sharp decline in energy spending was outlined in a weekly report of natural gas storage levels last week, which fell less than expected.
Inventories held in underground storage in the lower 48 states fell by 47 billion cubic feet to about 2.83 trillion cubic feet, according to the Energy Information Administration.
Analysts had expected a drop of between 78 billion to 83 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
After the report, natural gas for February delivery fell nearly 5 percent.
The natural gas figures were released a day after EIA said inventories of commercial crude rose 6.7 million barrels, much higher than the 1.5 million-barrel build expected by analysts.
Crude has become so cheap, traders who are taking delivery have begun storing it at sea to sell at a later date.
"Demand is going to be lower than expected and we still have a lot of oil out there in tanks and storage," said Michael Lynch, president of Strategic Energy & Economic Research Inc. "Inventories are high in terms of barrels but when you think of the fact that demand is down they're very high."
Analyst Phil Flynn of Alaron Trading Corp believes oil prices could drop below US$35 a barrel again, as they did last month, before rebounding.
"Right now our oil supplies are more than ample. I mean, you can almost say that we have an oil glut right now," he said. "The only thing that I think is going to get prices up sustainably for the long run is a big improvement in the economy."
Yet almost every time a new spate of economic data is released, it points to a long and painful downturn.
On Yesterday, President-elect Barack Obama said the recession could "linger for years" unless Congress pumps unprecedented sums from Washington into the economy.
Energy prices mirrored a drop on Wall Street as investors pulled back after seeing how many people continue to seek unemployment benefits and more bad news from retailers.
The Dow Jones industrials fell by 50 points in late afternoon trading.
The Labor Department said 4.61 million Americans continued to seek jobless benefits, up 101,000. That exceeded analysts' expectations of 4.5 million and was the highest level since November 1982, when the nation was emerging from a steep recession, though the labor force has grown by about half since then.
Wall Street headed downward as retailers revealed weak sales.
Wal-Mart, the largest retailer in the US, slashed its fourth-quarter earnings forecast with sales less than analysts expected.
Department-store operator Macy's Inc. said it will close 11 stores in nine states - affecting 960 employees - and also lowered its forecast for the fourth quarter.
Oil prices had risen earlier this week to above US$48 from a five-year low of US$33.87 a barrel on Dec. 19 on investor concern that the conflict between Israel and Hamas in Gaza could spread to the rest of oil-rich Middle East and affect supplies.
Lebanese militants fired at least three rockets into Israel early yesterday, threatening to open a new front for the Jewish state as it pushed forward with a bloody offensive in the Gaza Strip that has killed nearly 700 people. Israel responded with mortar shells.
Adding some support to prices is the continued gas dispute between Ukraine and Russia, with all gas deliveries to Europe through Ukraine frozen for a second day. Both sides met earlier yesterday and were in Brussels to speak to the EU about how to resolve the impasse.
In other Nymex trading, gasoline futures rose 1.18 cents to settle at US$1.0882 a gallon. Heating oil fell 2.35 cents to settle at US$1.5196 a gallon, while natural gas for February delivery tumbled 29 cents to settle at US$5.583 per 1,000 cubic feet.
In London, February Brent crude fell US$1.19 to settle at US$44.67 a barrel on the ICE Futures exchange.
Light, sweet crude for February delivery fell US$93 cents to settle at US$41.70 a barrel on the New York Mercantile Exchange. On Wednesday, prices tumbled more than 12 percent in the largest single-day percentage decline since September 2001.
A sharp decline in energy spending was outlined in a weekly report of natural gas storage levels last week, which fell less than expected.
Inventories held in underground storage in the lower 48 states fell by 47 billion cubic feet to about 2.83 trillion cubic feet, according to the Energy Information Administration.
Analysts had expected a drop of between 78 billion to 83 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
After the report, natural gas for February delivery fell nearly 5 percent.
The natural gas figures were released a day after EIA said inventories of commercial crude rose 6.7 million barrels, much higher than the 1.5 million-barrel build expected by analysts.
Crude has become so cheap, traders who are taking delivery have begun storing it at sea to sell at a later date.
"Demand is going to be lower than expected and we still have a lot of oil out there in tanks and storage," said Michael Lynch, president of Strategic Energy & Economic Research Inc. "Inventories are high in terms of barrels but when you think of the fact that demand is down they're very high."
Analyst Phil Flynn of Alaron Trading Corp believes oil prices could drop below US$35 a barrel again, as they did last month, before rebounding.
"Right now our oil supplies are more than ample. I mean, you can almost say that we have an oil glut right now," he said. "The only thing that I think is going to get prices up sustainably for the long run is a big improvement in the economy."
Yet almost every time a new spate of economic data is released, it points to a long and painful downturn.
On Yesterday, President-elect Barack Obama said the recession could "linger for years" unless Congress pumps unprecedented sums from Washington into the economy.
Energy prices mirrored a drop on Wall Street as investors pulled back after seeing how many people continue to seek unemployment benefits and more bad news from retailers.
The Dow Jones industrials fell by 50 points in late afternoon trading.
The Labor Department said 4.61 million Americans continued to seek jobless benefits, up 101,000. That exceeded analysts' expectations of 4.5 million and was the highest level since November 1982, when the nation was emerging from a steep recession, though the labor force has grown by about half since then.
Wall Street headed downward as retailers revealed weak sales.
Wal-Mart, the largest retailer in the US, slashed its fourth-quarter earnings forecast with sales less than analysts expected.
Department-store operator Macy's Inc. said it will close 11 stores in nine states - affecting 960 employees - and also lowered its forecast for the fourth quarter.
Oil prices had risen earlier this week to above US$48 from a five-year low of US$33.87 a barrel on Dec. 19 on investor concern that the conflict between Israel and Hamas in Gaza could spread to the rest of oil-rich Middle East and affect supplies.
Lebanese militants fired at least three rockets into Israel early yesterday, threatening to open a new front for the Jewish state as it pushed forward with a bloody offensive in the Gaza Strip that has killed nearly 700 people. Israel responded with mortar shells.
Adding some support to prices is the continued gas dispute between Ukraine and Russia, with all gas deliveries to Europe through Ukraine frozen for a second day. Both sides met earlier yesterday and were in Brussels to speak to the EU about how to resolve the impasse.
In other Nymex trading, gasoline futures rose 1.18 cents to settle at US$1.0882 a gallon. Heating oil fell 2.35 cents to settle at US$1.5196 a gallon, while natural gas for February delivery tumbled 29 cents to settle at US$5.583 per 1,000 cubic feet.
In London, February Brent crude fell US$1.19 to settle at US$44.67 a barrel on the ICE Futures exchange.
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