OIL FUTURES: Nymex Crude Down As US Economic Concerns Return
10/30/2009 09:56AM
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Crude futures fell Friday, as doubts returned about the pace of the U.S. economic recovery, despite the previous day's report of stronger-than-expected GDP growth.
Light, sweet crude for December delivery recently traded 61 cents, or 0.8%, lower at $79.26 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 80 cents lower at $77.24 a barrel.
Little of the optimism about the economy from Thursday's rally carried over into Friday's trading. Oil prices had soared to end at nearly $80 a barrel after the U.S. Commerce Department reported that gross domestic product grew by a robust 3.5%, signaling that the world's largest economy was emerging from its worst recession in decades.
But the economic outlook is far from certain and recovery in GDP didn't mask weak points such as recent drops in consumer confidence and high unemployment. On Friday, the Commerce Department reported a 0.5% drop in consumer spending for September, the biggest since December 2008.
Spooked investors returned to the dollar and moved away from higher-risk assets like oil and equities, which have hit one-year highs recently on expectations of steady economic growth.
The euro was recently at $1.4795, from $1.4859 earlier in the day, while U.S. equity futures pointed to a lower opening for stocks.
"The reversal in the dollar is a big deal; I'm thinking there's a good chance we put some peaks in here in crude," said Tom Bentz, a broker and analyst with BNP Paribas Commodity Futures Inc. "$82 (a barrel) looks like it could be a top for now."
Oil prices are still above the prices seen for most of the summer and early autumn of around $70 a barrel, but market participants say there is little other than the weak dollar to keep futures at current levels.
U.S. demand is still weak - despite the third-quarter GDP growth - and consumption hasn't picked up enough in fast-expanding economies like China to put much of a dent in the global surplus of oil and fuel.
Using the amount of oil held offshore on tankers as a measure, the glut is still growing, according to JBC Energy, a Vienna-based consultancy. Oil held in floating storage was unchanged in October at between 40 million and 45 million barrels, while offshore stocks of distillate, such as diesel, rose by at least 20 million barrels, to between 85 million and 95 million barrels.
Front-month November reformulated gasoline blendstock, or RBOB, recently traded 22.09 cents, or 1%, lower at $1.9981 a gallon. November heating oil traded 2.82 cents, or 1.4%, lower at $2.0260 a gallon. Both contracts expire at the end of Friday's session.