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Energy prices slump after Labor Department report
Source: Agencies |
August 12, 2009, Wednesday
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ENERGY prices slumped yesterday on a Labor Department report that suggested consumer spending, a major economic driver, may be depressed for some time as companies cut back.
Benchmark crude for September delivery fell US$1.15 to settle at US$69.45 a barrel on the New York Mercantile Exchange. It was the fourth straight day of declines and the first time this month that the price for crude dipped below US$69.
Oil prices have ended the week higher for five straight weeks, a period that coincides with earnings reports from U.S. companies. The results appeared surprisingly healthy, which gave energy prices a boost on the belief that the recession has loosened its grip.
While that may be true, data from the Labor Department yesterday again showed that company profits were in many cases buoyed by less spending on employee pay.
The Labor Department reported that productivity, the amount of output per hour of work, rose at an annual rate of 6.4 percent in the April-June quarter.
In normal economic times companies might pay more for workers and increase production. Yet companies during the recession have instead frozen hiring and cut hours to prop up profits.
If workers are not getting the hours they need, the pullback on spending for everything from gasoline to products made from petroleum, will likely remain depressed.
That has already happened this year.
The Energy Information Administration in its short-term energy outlook yesterday said U.S. consumption of liquid fuels will fall by 4.1 percent this year. The falloff in gasoline sales has been tempered somewhat because it's become so cheap compared with past years.
Crude prices rose early in the day on reports from China that the nation's exports, retail sales and factory output improved in July, and the country imported a record 4.6 million barrels of fuel a day last month.
The market reversed course when the Labor Department released its report and oil prices fell 2 percent.
The monthly forecast by the Organization of Petroleum Exporting Countries also may have helped pushed energy prices down. OPEC - responsible for about a third of the world's crude production - said it expected demand to fall by 1.65 million barrels a day this year, compared with last year, before rising in 2010.
The Federal Reserve on yesterday begins a two-day meeting that could shed more light on the U.S. economy. An interest-rate hike is highly unlikely, but people want to hear what the Fed will say about the state of the economy, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
"By and large, we're just taking a little of this economic optimism out of the market right now and responding to the possibility that we're going to see a more stable currency environment going forward," he said.
The falling dollar has helped push crude prices up because oil is priced in the U.S. currency.
The EIA predicted yesterday that gas prices will average around US$2.34 per gallon in 2009.
In other Nymex trading, gasoline for September delivery gained 1.38 cents to settle at US$2.9422 a gallon and heating oil fell 1.59 cents to settle at US$1.9117. Natural gas for September delivery fell 10 cents to settle at US$3.541 per 1,000 cubic feet.
In London, Brent prices fell US$1.04 to settle at US$72.46 a barrel on the ICE Futures exchange.
Benchmark crude for September delivery fell US$1.15 to settle at US$69.45 a barrel on the New York Mercantile Exchange. It was the fourth straight day of declines and the first time this month that the price for crude dipped below US$69.
Oil prices have ended the week higher for five straight weeks, a period that coincides with earnings reports from U.S. companies. The results appeared surprisingly healthy, which gave energy prices a boost on the belief that the recession has loosened its grip.
While that may be true, data from the Labor Department yesterday again showed that company profits were in many cases buoyed by less spending on employee pay.
The Labor Department reported that productivity, the amount of output per hour of work, rose at an annual rate of 6.4 percent in the April-June quarter.
In normal economic times companies might pay more for workers and increase production. Yet companies during the recession have instead frozen hiring and cut hours to prop up profits.
If workers are not getting the hours they need, the pullback on spending for everything from gasoline to products made from petroleum, will likely remain depressed.
That has already happened this year.
The Energy Information Administration in its short-term energy outlook yesterday said U.S. consumption of liquid fuels will fall by 4.1 percent this year. The falloff in gasoline sales has been tempered somewhat because it's become so cheap compared with past years.
Crude prices rose early in the day on reports from China that the nation's exports, retail sales and factory output improved in July, and the country imported a record 4.6 million barrels of fuel a day last month.
The market reversed course when the Labor Department released its report and oil prices fell 2 percent.
The monthly forecast by the Organization of Petroleum Exporting Countries also may have helped pushed energy prices down. OPEC - responsible for about a third of the world's crude production - said it expected demand to fall by 1.65 million barrels a day this year, compared with last year, before rising in 2010.
The Federal Reserve on yesterday begins a two-day meeting that could shed more light on the U.S. economy. An interest-rate hike is highly unlikely, but people want to hear what the Fed will say about the state of the economy, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
"By and large, we're just taking a little of this economic optimism out of the market right now and responding to the possibility that we're going to see a more stable currency environment going forward," he said.
The falling dollar has helped push crude prices up because oil is priced in the U.S. currency.
The EIA predicted yesterday that gas prices will average around US$2.34 per gallon in 2009.
In other Nymex trading, gasoline for September delivery gained 1.38 cents to settle at US$2.9422 a gallon and heating oil fell 1.59 cents to settle at US$1.9117. Natural gas for September delivery fell 10 cents to settle at US$3.541 per 1,000 cubic feet.
In London, Brent prices fell US$1.04 to settle at US$72.46 a barrel on the ICE Futures exchange.
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