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Oil prices dip on lingering European debt concern
Source: Agencies |
December 1, 2010, Wednesday
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OIL prices rose nearly 4 percent during November as European debt problems tempered some hopes for improving demand that sent prices to a two-year high nearly three weeks ago.
Benchmark oil for January delivery gave up US$1.62 to settle yesterday at US$84.11 a barrel on the New York Mercantile Exchange. Since Nov. 1, oil has drifted between US$81 a barrel and US$88 a barrel but remains up about 6.6 percent on the year.
Meanwhile, pump prices edged lower overnight to US$2.854 for a gallon of unleaded regular gasoline, according to AAA, Wright Express and Oil Price Information Service. It's fallen nearly 2 cents a gallon in the past week but remains nearly 23 cents more than a year ago.
Oil's price, many analysts believe, has been more influenced recently by shifts in the global economy than by the dollar or supply and demand basics.
"This is a remarkably resilient commodity right now. If you can't find a fundamental reason to like it, you can often find an asset class reason to like it and recently it does seem to have been added into the group of a few things are that are considered safe havens," Cameron Hanover analyst Peter Beutel said.
Early this month, oil prices set a two-year high just above US$88 a barrel, buoyed by improving economies in Asia and emerging nations. U.S. and European inventories also were declining and new forecasts from OPEC and others predicted stronger demand.
Yet, the price has drifted lower as traders have focused more on European debt problems and the impact of China's efforts to rein in robust growth, which could affect oil demand.
Stock investors and traders are worried that financial problems in some European countries could affect the economy if the debt crisis extends to Spain, Portugal or Italy. Spain and Portugal have denied they will need outside help to solve their problems but many investors wonder if bailout packages will be needed. Earlier this week, the European Union agreed on a bailout plan for Ireland.
Those concerns overshadowed The Conference Board's latest report, which stated its Consumer Confidence Index rose to 43.3 in November, the highest level since June. It takes a level of 90 to indicate a healthy economy, which hasn't been approached since the recession began in December 2007.
The uncertainty caused the dollar to grow stronger against the euro. Since oil and other commodities are priced in dollars, a stronger dollar makes them more expensive for buyers using foreign currencies.
That forced traders to pay attention yesterday, a day after they shrugged off a stronger dollar and sent oil prices up about 2 percent, energy analyst Jim Ritterbusch said. "You can only ignore the weakness in the euro for so long," he added.
Among energy products, the top performer for November was gasoline, which rose nearly 7 percent. Heating oil climbed 4.6 percent while natural gas added 3.9 percent.
In other early Nymex trading in December contracts, heating oil fell 4.12 cents to US$2.3169 a gallon and gasoline lost 1.94 cents at US$2.2652 a gallon.
Natural gas for January delivery gave up 3 cents to US$4.180 per 1,000 cubic feet.
In London, Brent crude lost US$1.53 to US$85.92 a barrel on the ICE Futures exchange.
Benchmark oil for January delivery gave up US$1.62 to settle yesterday at US$84.11 a barrel on the New York Mercantile Exchange. Since Nov. 1, oil has drifted between US$81 a barrel and US$88 a barrel but remains up about 6.6 percent on the year.
Meanwhile, pump prices edged lower overnight to US$2.854 for a gallon of unleaded regular gasoline, according to AAA, Wright Express and Oil Price Information Service. It's fallen nearly 2 cents a gallon in the past week but remains nearly 23 cents more than a year ago.
Oil's price, many analysts believe, has been more influenced recently by shifts in the global economy than by the dollar or supply and demand basics.
"This is a remarkably resilient commodity right now. If you can't find a fundamental reason to like it, you can often find an asset class reason to like it and recently it does seem to have been added into the group of a few things are that are considered safe havens," Cameron Hanover analyst Peter Beutel said.
Early this month, oil prices set a two-year high just above US$88 a barrel, buoyed by improving economies in Asia and emerging nations. U.S. and European inventories also were declining and new forecasts from OPEC and others predicted stronger demand.
Yet, the price has drifted lower as traders have focused more on European debt problems and the impact of China's efforts to rein in robust growth, which could affect oil demand.
Stock investors and traders are worried that financial problems in some European countries could affect the economy if the debt crisis extends to Spain, Portugal or Italy. Spain and Portugal have denied they will need outside help to solve their problems but many investors wonder if bailout packages will be needed. Earlier this week, the European Union agreed on a bailout plan for Ireland.
Those concerns overshadowed The Conference Board's latest report, which stated its Consumer Confidence Index rose to 43.3 in November, the highest level since June. It takes a level of 90 to indicate a healthy economy, which hasn't been approached since the recession began in December 2007.
The uncertainty caused the dollar to grow stronger against the euro. Since oil and other commodities are priced in dollars, a stronger dollar makes them more expensive for buyers using foreign currencies.
That forced traders to pay attention yesterday, a day after they shrugged off a stronger dollar and sent oil prices up about 2 percent, energy analyst Jim Ritterbusch said. "You can only ignore the weakness in the euro for so long," he added.
Among energy products, the top performer for November was gasoline, which rose nearly 7 percent. Heating oil climbed 4.6 percent while natural gas added 3.9 percent.
In other early Nymex trading in December contracts, heating oil fell 4.12 cents to US$2.3169 a gallon and gasoline lost 1.94 cents at US$2.2652 a gallon.
Natural gas for January delivery gave up 3 cents to US$4.180 per 1,000 cubic feet.
In London, Brent crude lost US$1.53 to US$85.92 a barrel on the ICE Futures exchange.
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