Oil Falls With Broader Markets As Debt Woes Weigh
Oil futures declined Monday, as worries about U.S. and European debt battered markets across the board.
Light, sweet crude for January delivery settled down 75 cents, or 0.8%, to $96.92 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently settled down 68 cents, or 0.6%, to $106.88 a barrel.
Crude futures followed broader markets lower after news that the Congressional supercommittee charged with reducing the U.S. deficit had reached a stalemate. Lawmakers met one last time Monday in order to seek a last-minute deal, but markets had already braced for their failure.
The Standard & Poor's 500 index--a barometer that has dictated the movement in crude futures for several months--was recently down 2%, at 1191.7.
"In the whole marketplace ... it just seems like there's not a lot of strength," said Tony Rosado, broker with GA Global Markets, an oil options brokerage, in New York. "Our equities are down considerably--we're following that and we're following what the overseas markets are doing."
Crude futures also took cues from the strengthening dollar. The ICE Dollar Index, which tracks the greenback against a basket of currencies, was recently up 0.3%, to 78.236, gaining against the euro as worries persisted over Europe's debt crisis.
The election of a fiscally conservative government in Spain failed to calm European markets, as Spanish borrowing costs marched close to their highest levels since the onset of Europe's sovereign-debt crisis.
"There's a big repatriation into the dollar," said Phil Flynn, energy analyst at brokerage PFG Best in Chicago. "The big elephant in the room continues to be Europe."
A stronger dollar typically weighs on oil prices by making the dollar-denominated commodity more expensive for holders of foreign currencies
Crude prices have declined sharply in recent sessions following last Wednesday's run to $100 a barrel, the first time the Nymex benchmark had hit that level in five months. The U.S. marker was lifted by news of reversal of the Seaway pipeline, a line that currently ships oil from the Houston area to Cushing, Okla., the Nymex delivery point.
Traders expect the reversal will ease the glut of oil at Cushing, bringing the price of Nymex crude back in line with benchmarks like Europe's Brent contract. That contract has been above $100 a barrel for most of this year.
However, the reversal still remains months away and, in the meantime, market participants have had doubts about the economy's ability to withstand triple-digit oil prices.
Front-month December reformulated gasoline blendstock, or RBOB, settled up 0.66 cent, or 0.3%, to $2.4850 a gallon. December heating oil settled down 4.05 cents, or 1.3%, to $2.9920 a gallon.
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