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Oil prices tumble on jobs, housing consumer data
Source: Agencies |
January 28, 2009, Wednesday
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OIL prices tumbled yesterday with more evidence of decline in the US housing industry, more job cuts and plunging consumer confidence, all of which can lead to diminished energy spending.
Light, sweet crude for March delivery lost US$4.15 a barrel, or 9 percent, to settle at US$41.58 in trading on the New York Mercantile Exchange. It was the second straight day of declines after oil prices rallied last week.
The Standard & Poor's/Case-Shiller 20-city index of home prices released yesterday tumbled by a record 18.2 percent from November 2007, the largest decline since its inception in 2000. The 10-city index dropped 19.1 percent, tied with October for the biggest drop in its 21-year history.
Both indices have recorded year-over-year declines for 23 straight months. Prices are at levels not seen since February 2004.
Meanwhile, the Conference Board said its Consumer Confidence Index edged lower in January to 37.7 from a revised 38.6 in December. That's a historic low for the widely watched barometer, as Americans worry about their jobs and watch the value of their homes and retirement funds shrink.
There was more grim news on the jobs front, as specialty glass and ceramics maker Corning Inc. said it will cut 3,500 jobs. That follows job cut announcements Monday from Caterpillar, Home Depot and Sprint Nextel.
The decline comes after prices had jumped 11 percent at the end of the last week despite new figures that showed how demand for energy has waned.
"The oil market just ran out of gas," said Mike Zarembski of OptionsXpress.
The consumer confidence number shows the economy remains weak and there is no demand for energy, he said.
Traders say oil seems to be stuck in a range.
"Right now, the market is in indecisive mode," said Phil Flynn of Alaron Trading Corp. "I think it is searching for the next big move."
Flynn said even with talk of production cuts by the Organization of Petroleum Exporting Countries, which produces 40 percent of the world's oil, and plans designed to stimulate the US economy, demand for oil remains weak. Despite some of the coldest temperatures in years across the nation, the markets remains well supplied, he said.
"The industrial demand is just not there," he said.
Jim Ritterbusch, president of Ritterbusch and Associates, said it looks like traders are taking profits after last week's jump.
"We're in one of those periods where it is difficult to explain every one- or two-dollar movement," he said.
Traders will be watching economic data due out later this week, including the weekly oil inventory report today, durable goods orders for December and weekly unemployment claims on Thursday and the first figures on fourth-quarter gross domestic product on Friday. Many analysts believe the GDP, the nation's total output of goods and services, plunged at an annual rate of 6 percent in the quarter, after dropping 0.5 percent in the third quarter.
The reports figure to either solidify support for oil at current prices or could send prices lower if they are especially weak, said Addison Armstrong of Tradition Energy. "I don't think we go dramatically higher."
Federal Reserve policymakers begin a two-day meeting yesterday to examine what other tools they can use to rouse the sluggish economy. They are all but certain to leave a key interest rate at a record low, near zero.
In other Nymex trading, gasoline futures fell 4.46 cents to settle at US$1.1085 a gallon, while natural gas rose 1.3 cents to settle at US$4.49 per 1,000 cubic feet. Heating oil gave up 5.25 cents to settle at US$1.3745 a gallon.
In London, the March Brent contract fell US$3.23 to settle at US$43.73 on the ICE Futures exchange.
Light, sweet crude for March delivery lost US$4.15 a barrel, or 9 percent, to settle at US$41.58 in trading on the New York Mercantile Exchange. It was the second straight day of declines after oil prices rallied last week.
The Standard & Poor's/Case-Shiller 20-city index of home prices released yesterday tumbled by a record 18.2 percent from November 2007, the largest decline since its inception in 2000. The 10-city index dropped 19.1 percent, tied with October for the biggest drop in its 21-year history.
Both indices have recorded year-over-year declines for 23 straight months. Prices are at levels not seen since February 2004.
Meanwhile, the Conference Board said its Consumer Confidence Index edged lower in January to 37.7 from a revised 38.6 in December. That's a historic low for the widely watched barometer, as Americans worry about their jobs and watch the value of their homes and retirement funds shrink.
There was more grim news on the jobs front, as specialty glass and ceramics maker Corning Inc. said it will cut 3,500 jobs. That follows job cut announcements Monday from Caterpillar, Home Depot and Sprint Nextel.
The decline comes after prices had jumped 11 percent at the end of the last week despite new figures that showed how demand for energy has waned.
"The oil market just ran out of gas," said Mike Zarembski of OptionsXpress.
The consumer confidence number shows the economy remains weak and there is no demand for energy, he said.
Traders say oil seems to be stuck in a range.
"Right now, the market is in indecisive mode," said Phil Flynn of Alaron Trading Corp. "I think it is searching for the next big move."
Flynn said even with talk of production cuts by the Organization of Petroleum Exporting Countries, which produces 40 percent of the world's oil, and plans designed to stimulate the US economy, demand for oil remains weak. Despite some of the coldest temperatures in years across the nation, the markets remains well supplied, he said.
"The industrial demand is just not there," he said.
Jim Ritterbusch, president of Ritterbusch and Associates, said it looks like traders are taking profits after last week's jump.
"We're in one of those periods where it is difficult to explain every one- or two-dollar movement," he said.
Traders will be watching economic data due out later this week, including the weekly oil inventory report today, durable goods orders for December and weekly unemployment claims on Thursday and the first figures on fourth-quarter gross domestic product on Friday. Many analysts believe the GDP, the nation's total output of goods and services, plunged at an annual rate of 6 percent in the quarter, after dropping 0.5 percent in the third quarter.
The reports figure to either solidify support for oil at current prices or could send prices lower if they are especially weak, said Addison Armstrong of Tradition Energy. "I don't think we go dramatically higher."
Federal Reserve policymakers begin a two-day meeting yesterday to examine what other tools they can use to rouse the sluggish economy. They are all but certain to leave a key interest rate at a record low, near zero.
In other Nymex trading, gasoline futures fell 4.46 cents to settle at US$1.1085 a gallon, while natural gas rose 1.3 cents to settle at US$4.49 per 1,000 cubic feet. Heating oil gave up 5.25 cents to settle at US$1.3745 a gallon.
In London, the March Brent contract fell US$3.23 to settle at US$43.73 on the ICE Futures exchange.
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