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Oil prices fall as stock markets decline
Source: Agencies |
September 2, 2009, Wednesday
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OIL prices dipped again yesterday despite new indications that the U.S. manufacturing and housing industries may be on the mend.
Benchmark crude for October delivery fell US$1.91 to settle at US$68.05 a barrel on the New York Mercantile Exchange.
The contract Monday lost US$2.78 to settle at US$69.96, meaning crude has fallen almost 6 percent this week.
However, it appeared energy prices were rebounding yesterday after the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index rose to 52.9 in August. That is the first reading above 50, which indicates expansion, since January 2008. It's also the highest since June 2007.
The National Association of Realtors said pending U.S. home sales rose to the highest level in more than two years as first-time buyers rushed to take advantage of a tax credit that expires this fall.
That type of news this year has pushed energy prices higher because if heavy industries are ramping up production and people are buying homes, it is likely that spending on energy will rise as well.
The bounce in energy prices yesterday was short-lived and both equity and energy markets reversed course before noon.
PFGBest analyst Phil Flynn questioned whether the manufacturing report gave a skewed image of the economy.
"The question is the sustainability," he said.
Another possible reason for the volatile prices yesterday is the low volume on the floor of the Nymex.
It is typical for futures prices to swing in the week before a holiday and some traders said there was nothing to be read into falling prices before the Labor Day weekend begins.
"I'm not putting anything on what we see this week," said oil analyst and trader Stephen Schork.
Looking ahead, there is little to suggest that the supply of crude or gasoline will be constrained.
Even though most energy experts believe the government will report a draw-down in gasoline and crude stocks Wednesday as part of its weekly report, levels remain very high and the driving season is coming to a close.
Gasoline consumption fell 5 percent for the week ended Friday from a year ago when approaching Hurricane Gustav caused a spike in consumption along the Gulf of Mexico, according to the MasterCard Spendig Pulse report. Consumption was down from the previous week by 2.9 percent, in part because of bad weather along the East Coast caused by tropical storm Danny.
MasterCard's report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.
In other Nymex trading, gasoline for October delivery fell by 2.77 cents to settle at US$1.7822 a gallon and heating oil fell 4.96 cents to settle at US$1.7589 a gallon. Natural gas shed 15.6 cents to settle at US$2.821 per 1,000 cubic feet.
In London, Brent crude fell US$1.92 to settle at US$67.73.
Benchmark crude for October delivery fell US$1.91 to settle at US$68.05 a barrel on the New York Mercantile Exchange.
The contract Monday lost US$2.78 to settle at US$69.96, meaning crude has fallen almost 6 percent this week.
However, it appeared energy prices were rebounding yesterday after the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index rose to 52.9 in August. That is the first reading above 50, which indicates expansion, since January 2008. It's also the highest since June 2007.
The National Association of Realtors said pending U.S. home sales rose to the highest level in more than two years as first-time buyers rushed to take advantage of a tax credit that expires this fall.
That type of news this year has pushed energy prices higher because if heavy industries are ramping up production and people are buying homes, it is likely that spending on energy will rise as well.
The bounce in energy prices yesterday was short-lived and both equity and energy markets reversed course before noon.
PFGBest analyst Phil Flynn questioned whether the manufacturing report gave a skewed image of the economy.
"The question is the sustainability," he said.
Another possible reason for the volatile prices yesterday is the low volume on the floor of the Nymex.
It is typical for futures prices to swing in the week before a holiday and some traders said there was nothing to be read into falling prices before the Labor Day weekend begins.
"I'm not putting anything on what we see this week," said oil analyst and trader Stephen Schork.
Looking ahead, there is little to suggest that the supply of crude or gasoline will be constrained.
Even though most energy experts believe the government will report a draw-down in gasoline and crude stocks Wednesday as part of its weekly report, levels remain very high and the driving season is coming to a close.
Gasoline consumption fell 5 percent for the week ended Friday from a year ago when approaching Hurricane Gustav caused a spike in consumption along the Gulf of Mexico, according to the MasterCard Spendig Pulse report. Consumption was down from the previous week by 2.9 percent, in part because of bad weather along the East Coast caused by tropical storm Danny.
MasterCard's report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.
In other Nymex trading, gasoline for October delivery fell by 2.77 cents to settle at US$1.7822 a gallon and heating oil fell 4.96 cents to settle at US$1.7589 a gallon. Natural gas shed 15.6 cents to settle at US$2.821 per 1,000 cubic feet.
In London, Brent crude fell US$1.92 to settle at US$67.73.
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