NEW YORK (Dow Jones Newswires), Dec. 12, 2011
Crude futures dropped Monday, falling with other risky assets as worries grow that last week's actions by European leaders won't be able to prevent the euro zone's slide toward recession.
Light, sweet crude for January delivery settled $1.64, or 1.7%, lower at $97.77 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 25. Brent crude on the ICE futures exchange fell $1.73 to $107.26 a barrel.
Oil futures, the euro and stock markets all declined as enthusiasm faded surrounding the European Union summit meeting and plans to further integrate the economies of Europe through a revised treaty. Fitch Ratings on Monday predicted a "significant" economic downturn in Europe in the short term and said last week's summit "does little to ease pressure" surrounding Europe's debt crisis.
The oil market has closely tracked developments in Europe as concerns grow that a recession in the region could cut into global oil demand.
"We're showing our disappointment with the lack of an EU deal and the possibility of more downgrades going forward," said Phil Flynn, oil analyst at PFGBest.
Earlier Monday, ratings company Moody's said it still expects to reassess its ratings on European sovereign debt early next year as the agreement offered "few new measures." And rival credit rating company Standard & Poor's could take similar actions following its decision last week to place 15 euro-zone countries on credit watch with negative implications.
"The dark cloud right now is Europe," said Tony Rosado, a broker with GA Global Markets.
Meanwhile, traders are closely following comments from oil ministers of the Organization of Petroleum Exporting Countries ahead of Wednesday's meeting. The producer group is widely expected to agree to keep current output levels unchanged--a contrast from the June meeting when members failed to reach a deal.
OPEC's Economic Commission Board concluded Monday afternoon that the cartel should maintain its current output in 2012, according to a source who attended the meeting of the influential group. The board cut its global oil demand growth forecast for 2012 by around 100,000 barrels a day, a delegate said.
The advisory body discusses numbers provided by the OPEC secretariat, which are used as informal guidance at the meeting.
Analysts from JBC Energy expect official output to stay unchanged, which makes higher prices more likely than a drop as supplies remain tight.
"Apart from U.S. shale oil, there are currently no further positive surprises on the supply side," JBC analysts said in a research report.
Front-month January reformulated gasoline blendstock, or RBOB, settled 3.25 cents, or 1.3%, lower at $2.5636 a gallon. January heating oil settled 1.64 cents, or 0.6%, lower at $2.8961 a gallon.
Copyright (c) 2011 Dow Jones & Company, Inc.
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