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Oil settles lower, below US$106 per barrel
Source: Agencies |
March 25, 2011, Friday
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AFTER government reports gave a mixed read on the US economic recovery, oil prices yesterday settled close to where they began.
The Commerce Department said companies trimmed orders for manufactured goods in February, suggesting that businesses were limiting spending. Meanwhile the Labor Department said fewer Americans applied for unemployment benefits last week, indicating that employers could be expanding their work forces.
Benchmark crude prices fluctuated as traders digested the news, rising as high as US$106.69 a barrel before dropping back. The contract for May delivery fell 15 cents to settle at US$105.60 per barrel on the New York Mercantile Exchange.
The world is still flush with surplus oil, yet traders say the fighting in North Africa and the Middle East, combined with the Japanese nuclear crisis, could make it difficult for oil producers to keep up with rising demand.
PFGBest analyst Phil Flynn estimates that world oil demand will rise by 1 to 2 million barrels per day as Japan replaces power lost from its damaged nuclear reactors, and other countries like Germany take aging nuclear facilities offline.
Still, after a swift rise, oil traders are bracing for a downturn in energy markets and have been watching how the US economy handles higher energy prices. Analysts are concerned that rising fuel prices could impact business and consumer spending, which would slow the economic recovery. They are also gauging how European financial problems - Irish bank bailouts and the collapse of Portugal's government - will affect global energy demand.
"People are nervous about a correction that will inevitably come," Flynn said. "So, at the first sign of bad news, they sell, and when it doesn't fall that much, they jump back in."
Oil prices were buoyed yesterday by lower US unemployment claims, which fell almost 11 percent in the last seven weeks. Employers may be stepping up hiring and that would likely mean increased gasoline demand as more people rejoin the daily commute.
Natural gas prices fell after the government reported that US supplies dropped by 6 billion cubic feet, but remain above the five-year average. The contract for April delivery lost 9.1 cents to settle at US$4.244 per 1,000 cubic feet. Prices had increased about 13 percent since March 10. After the Energy Information Administration's report fell within analysts' expectations, traders sold to lock in profits, analyst Stephen Schork said.
In other Nymex trading for April contracts, heating oil added nearly a penny to settle at US$3.0787 a gallon and gasoline futures rose 2.22 cents to settle at US$3.0508 per gallon.
In London, Brent crude gained 13 cents to settle at US$115.60 per barrel on the ICE Futures exchange.
The Commerce Department said companies trimmed orders for manufactured goods in February, suggesting that businesses were limiting spending. Meanwhile the Labor Department said fewer Americans applied for unemployment benefits last week, indicating that employers could be expanding their work forces.
Benchmark crude prices fluctuated as traders digested the news, rising as high as US$106.69 a barrel before dropping back. The contract for May delivery fell 15 cents to settle at US$105.60 per barrel on the New York Mercantile Exchange.
The world is still flush with surplus oil, yet traders say the fighting in North Africa and the Middle East, combined with the Japanese nuclear crisis, could make it difficult for oil producers to keep up with rising demand.
PFGBest analyst Phil Flynn estimates that world oil demand will rise by 1 to 2 million barrels per day as Japan replaces power lost from its damaged nuclear reactors, and other countries like Germany take aging nuclear facilities offline.
Still, after a swift rise, oil traders are bracing for a downturn in energy markets and have been watching how the US economy handles higher energy prices. Analysts are concerned that rising fuel prices could impact business and consumer spending, which would slow the economic recovery. They are also gauging how European financial problems - Irish bank bailouts and the collapse of Portugal's government - will affect global energy demand.
"People are nervous about a correction that will inevitably come," Flynn said. "So, at the first sign of bad news, they sell, and when it doesn't fall that much, they jump back in."
Oil prices were buoyed yesterday by lower US unemployment claims, which fell almost 11 percent in the last seven weeks. Employers may be stepping up hiring and that would likely mean increased gasoline demand as more people rejoin the daily commute.
Natural gas prices fell after the government reported that US supplies dropped by 6 billion cubic feet, but remain above the five-year average. The contract for April delivery lost 9.1 cents to settle at US$4.244 per 1,000 cubic feet. Prices had increased about 13 percent since March 10. After the Energy Information Administration's report fell within analysts' expectations, traders sold to lock in profits, analyst Stephen Schork said.
In other Nymex trading for April contracts, heating oil added nearly a penny to settle at US$3.0787 a gallon and gasoline futures rose 2.22 cents to settle at US$3.0508 per gallon.
In London, Brent crude gained 13 cents to settle at US$115.60 per barrel on the ICE Futures exchange.
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