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Oil drops on economic news and demand worries
Source: Agencies |
August 19, 2011, Friday
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OIL fell sharply yesterday along with a broad sell-off in stocks triggered by ongoing worries about the global economy.
Benchmark West Texas Intermediate crude for September delivery fell US$5.20, or 5.9 percent, to finish at US$82.38 per barrel on the New York Mercantile Exchange.
Brent crude, used to price many international oil varieties, dropped US$3.61 to end at US$106.99 per barrel on the ICE Futures exchange in London.
In the US, two reports raised concerns about demand for gasoline, which is made from oil. First, more people than expected applied for unemployment benefits last week. And prices for gas, food and clothing rose last month.
Higher prices at a time when more people are out of work means Americans could drive even less than they do now. A private survey released earlier this week said US motorists have reduced gasoline purchases for 21 straight weeks.
Prices have swung wildly with every report about the US economy. Besides data about unemployment and prices, a private research group forecast sluggish growth for the rest of the year. Oil demand was supposed to pick up in the second half of 2011, but traders now wonder if it will happen.
"People are getting spooked," oil trader Stephen Schork says.
Meanwhile Libyan rebels claimed control over the country's last functioning oil refinery. Michael Lynch, president of Strategic Energy & Economic Research, says it's reasonable to expect Moammar Gadhafi's departure and a resumption of at least some Libyan exports by the end of the year. Libya's daily exports of almost 2 million barrels of crude have been shut down since unrest began in that country six months ago.
"Oil won't be coming out of there immediately, but it'll be sooner than a lot of people think," Lynch says.
The dollar rose yesterday as the euro and other currencies fell on worries about the health of European banks and the broader regional economy. A stronger dollar pushes down oil prices because oil is priced in dollars and becomes less attractive to investors with foreign currency as the dollar rises.
In other Nymex trading for September contracts, heating oil lost 8.68 cents, or 2.9 percent, to finish at US$2.8748 per gallon and gasoline futures dropped 8.71 cents, or 3 percent, to US$2.7832 per gallon. Natural gas lost 4.1 cents to end the day at US$3.892 per 1,000 cubic feet.
Benchmark West Texas Intermediate crude for September delivery fell US$5.20, or 5.9 percent, to finish at US$82.38 per barrel on the New York Mercantile Exchange.
Brent crude, used to price many international oil varieties, dropped US$3.61 to end at US$106.99 per barrel on the ICE Futures exchange in London.
In the US, two reports raised concerns about demand for gasoline, which is made from oil. First, more people than expected applied for unemployment benefits last week. And prices for gas, food and clothing rose last month.
Higher prices at a time when more people are out of work means Americans could drive even less than they do now. A private survey released earlier this week said US motorists have reduced gasoline purchases for 21 straight weeks.
Prices have swung wildly with every report about the US economy. Besides data about unemployment and prices, a private research group forecast sluggish growth for the rest of the year. Oil demand was supposed to pick up in the second half of 2011, but traders now wonder if it will happen.
"People are getting spooked," oil trader Stephen Schork says.
Meanwhile Libyan rebels claimed control over the country's last functioning oil refinery. Michael Lynch, president of Strategic Energy & Economic Research, says it's reasonable to expect Moammar Gadhafi's departure and a resumption of at least some Libyan exports by the end of the year. Libya's daily exports of almost 2 million barrels of crude have been shut down since unrest began in that country six months ago.
"Oil won't be coming out of there immediately, but it'll be sooner than a lot of people think," Lynch says.
The dollar rose yesterday as the euro and other currencies fell on worries about the health of European banks and the broader regional economy. A stronger dollar pushes down oil prices because oil is priced in dollars and becomes less attractive to investors with foreign currency as the dollar rises.
In other Nymex trading for September contracts, heating oil lost 8.68 cents, or 2.9 percent, to finish at US$2.8748 per gallon and gasoline futures dropped 8.71 cents, or 3 percent, to US$2.7832 per gallon. Natural gas lost 4.1 cents to end the day at US$3.892 per 1,000 cubic feet.
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