Crude futures on the New York Mercantile Exchange fell by 2.2% Tuesday, closing at the lowest level since mid-July against a backdrop of weak earnings results and growing concerns about the economy.
Nymex front-month futures for December delivery settled at $86.67 a barrel, down $1.98, the lowest settling price since July 12. Brent oil futures settled at $108.25, down $1.19.
Oil prices have been mostly on a downward trend since mid-September, fueled by the perception of plentiful oil supplies and continued concerns about the health of the global economy. But Tuesday's trading shifted oil into a lower range than it has experienced in recent months, generating talk that the commodity could have further to fall.
"You're seeing a move out of risk assets to more secure assets like the dollar," said Brian LaRose, a technical analyst with United ICAP. Mr. LaRose believes oil prices could retreat further in the coming period.
Market participants attributed Tuesday's decline to fresh concerns about industrial demand after disappointing earnings reports in recent days from Caterpillar Inc. and DuPont Co. The S&P 500 recently was 1.5% lower.
"There's a general concern that things aren't as rosy as people wanted to believe," said analyst Stephen Schork. "The Dow is very bearish, and that is weighing down oil prices."
Last month, Caterpillar predicted its revenue for the year would be about $2 billion lower than the midpoint of its July revenue range of between $68 billion and $70 billion. On Monday, it chopped an additional $1 billion from its revenue forecast and shaved its 2012 profit outlook, reinforcing a view of rapidly deteriorating end-market demand.
"As we've moved through the year, we've seen continued economic weakening and uncertainty," Chairman and Chief Executive Doug Oberhelman said. "It's definitely impacting our business with dealers intending to lower inventories and mining customers delaying some projects and reducing orders."
DuPont on Tuesday signaled that global industrial demand would remain weak in the current quarter as it announced plans to cut jobs and lowered full-year guidance.
Until Tuesday, oil prices had since mid-July generally traded in a band of $87.70-$93.66 a barrel. But Tuesday's movement suggested the market still needs to find a new floor for the commodity, analysts said.
"Now it looks like the market is taking a look at the early-July range," said Andy Lebow, senior vice president of energy futures at Jefferies Bache in New York.
Mr. LaRose said that if oil prices stay in the new lower range in the days ahead, oil could next test a downward price of $86.12. He traces the decline to a technical corrective pattern after oil retreated from the $100.42 a barrel reached on Sept. 14. Mr. LaRose said a driving factor behind the retreat was the strengthening dollar amid the uncertainty of the U.S. presidential election.
Front-month reformulated gasoline blendstock, or RBOB, settled at $2.605 a gallon, down 4.25 cents. Heating oil futures settled at $3.043 a gallon, down 3.33 cents.
Copyright (c) 2012 Dow Jones & Company, Inc.
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