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Oil drops to near US$74 as traders eye US economy
Source: Agencies |
September 7, 2010, Tuesday
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OIL prices slipped to near US$74 a barrel yesterday as traders weighed whether growing Chinese demand can offset weak U.S. fuel consumption amid high unemployment.
By early afternoon in Europe, benchmark oil for October delivery was down 45 cents at US$74.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 42 cents to settle at US$74.60 on Friday.
Markets in the United States were closed yesterday for the Labor Day holiday.
Most investors took heart after the Labor Department on Friday said private employers added 67,000 jobs in August, more than analysts expected. However, the jobless rate rose in August to 9.6 percent from 9.5 percent in July, showing that unemployment remains high despite massive stimulus spending during the last year.
Oil prices have been in a holding pattern around US$75 for most of the past year as developed countries rebound from last year's recession but economic growth threatens to slow in the second half.
"There is evidently concern that oil demand in the world's largest oil consuming country, the USA, will drop as the summer driving season comes to an end today, which may lead to a further rise in already high inventories," said a report from Commerzbank in Frankfurt.
Traders are looking to China and other emerging economies to fuel demand for commodities in coming years. If China continues to grow at its current rate of about 9 percent a year until about 2030, its oil demand would equal all of today's global crude production, HSBC chief economist Stephen King said.
"So the likelihood is over the next five to ten years, we'll see significantly higher oil prices," King said. "The China story is becoming more and more important."
Support for oil prices which had been expected from hurricanes in the Gulf of Mexico has so far failed to appear.
"Despite the hype around this summer's hurricane season, which was billed to be the worst since 2005, those that have struck so far have led to little enduring damage to oil installations," said a report from KBC Energy Economics in London.
In other Nymex trading in October contracts, heating oil fell 0.10 cent to US$2.0563 a gallon and gasoline dropped 0.70 cent to US$1.9125 a gallon. Natural gas for October delivery lost 2.3 cents to US$3.916 per 1,000 cubic feet.
In London, Brent crude was up 22 cents at US$76.89 on the ICE Futures exchange.
By early afternoon in Europe, benchmark oil for October delivery was down 45 cents at US$74.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 42 cents to settle at US$74.60 on Friday.
Markets in the United States were closed yesterday for the Labor Day holiday.
Most investors took heart after the Labor Department on Friday said private employers added 67,000 jobs in August, more than analysts expected. However, the jobless rate rose in August to 9.6 percent from 9.5 percent in July, showing that unemployment remains high despite massive stimulus spending during the last year.
Oil prices have been in a holding pattern around US$75 for most of the past year as developed countries rebound from last year's recession but economic growth threatens to slow in the second half.
"There is evidently concern that oil demand in the world's largest oil consuming country, the USA, will drop as the summer driving season comes to an end today, which may lead to a further rise in already high inventories," said a report from Commerzbank in Frankfurt.
Traders are looking to China and other emerging economies to fuel demand for commodities in coming years. If China continues to grow at its current rate of about 9 percent a year until about 2030, its oil demand would equal all of today's global crude production, HSBC chief economist Stephen King said.
"So the likelihood is over the next five to ten years, we'll see significantly higher oil prices," King said. "The China story is becoming more and more important."
Support for oil prices which had been expected from hurricanes in the Gulf of Mexico has so far failed to appear.
"Despite the hype around this summer's hurricane season, which was billed to be the worst since 2005, those that have struck so far have led to little enduring damage to oil installations," said a report from KBC Energy Economics in London.
In other Nymex trading in October contracts, heating oil fell 0.10 cent to US$2.0563 a gallon and gasoline dropped 0.70 cent to US$1.9125 a gallon. Natural gas for October delivery lost 2.3 cents to US$3.916 per 1,000 cubic feet.
In London, Brent crude was up 22 cents at US$76.89 on the ICE Futures exchange.
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