OIL FUTURES: Crude Drops On Demand Worries As Dollar Steadies
11/05/2009 02:51PM
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NEW YORK (Dow Jones)--Crude futures ended lower Thursday as a steadying dollar allowed concerns about weak oil demand to re-emerge.
Light, sweet crude for December delivery settled 78 cents, or 1%, lower at $79.62 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 90 cents, or 1.1%, lower at $77.99 a barrel.
Oil and other commodities were robbed of a major source of buying once it became clear that the dollar was going to hold steady at around $1.49 to the euro. Crude futures have risen steadily over the last few weeks when the dollar slipped, as oil becomes cheaper for holders of other currencies, and investors look for a way to reduce their exposure to the inflation a weakened dollar could cause.
"With the dollar basically stagnating at this point, a lot of investor money has come and gone," said Darin Newsom, senior analyst at DTN, a market information service in Omaha, Neb. "When these bursts of buying commodities go away, (trading) falls back to, are the fundamentals bullish or not?"
In the case of oil, the fundamentals still look bleak, with inventories above normal and demand below year-ago levels in the U.S., the world's biggest oil consumer. On Wednesday, the Energy Department reported a decline in oil and fuel inventories, but said demand in the four weeks ended Oct. 30 was still off 4.5% from a year ago.
Equities have at times provided the additional boost needed to set new highs in the face of weak demand, with the Dow Jones Industrial Average's rush to 10000 helping oil crack $80 a barrel in October. On Thursday, the Dow was up 1.8% at 9978 when oil futures settled, but the surge in U.S. equities appeared to be having little impact.
"The market is a little bit apprehensive above $80 a barrel," said Tom Bentz, a broker and analyst with BNP Paribas of New York. "The market's perhaps a little hesitant to punch through here without some further development."
Oil prices have bounced back after slipping below $78 a barrel as well, indicating that $80 a barrel may be emerging as the center of a narrow trading range, similar to the tight band around $70 a barrel where prices traded for most of the summer and early fall.
Front-month December reformulated gasoline blendstock, or RBOB, settled 2.50 cents, or 1.2%, lower at $1.9877 a gallon. December heating oil settled 3.26 cents, or 1.6%, lower at $2.0576 a gallon.
More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
-By Brian Baskin, Dow Jones Newswires; 212-416-2453; brian.baskin@dowjones.com