Testing a new floor in the lower $70s, crude oil futures trading on the New York Mercantile Exchange on Tuesday were further pressured by a strengthening U.S. currency, which trumped the euro on financial woes concerning Fitch's downgraded credit rating for Greece. Moreover, equity markets spiralled downward on grim consumer sales reports.
Settling to its lowest level since Oct. 9, the price of light, sweet crude oil for January delivery booked an additional loss of more than $1, ultimately closing at a final price tag of $72.62 a barrel on the NYMEX. Thus far, front month crude has fallen for four previous sessions, tallying a combined drop of more than 4%.
Conversely, natural gas spot prices at the Henry Hub broke new ground after trading in the lower end of its contract range for some time, today soaring above its threshold to $5.114 per thousand cubic feet.
"We're down five consecutive days here for crude oil, and down more than 10% from this year's highs," remarked Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
"People are beginning to assess at what point will this sell-off start to abate. If the dollar continues to rebound the way it has in the last two trading sessions, we'll have to revise our downside forecast."
Demand Concerns Beat Down Crude Market
The U.S. Energy Information Administration on Tuesday reported its short-term outlook for 2010, revising downward its forecast for increased demand in the next year, but raising its forecast for OPEC and non-OPEC production.
Disappointed with the revision, the market was reminded once again of the lack of sufficient oil demand to pare down rising stockpiles of domestic crude oil products. A Reuters poll of analysts has already predicted an additional rise in crude inventories by 500,000 barrels last week.
"I think the market is turning its attention back to the weak fundamental picture that's basically been overhanging the market for the last three or four months," McGillian contended.
"With the dollar starting to rebound, one of the main drivers of rising oil prices seems to have evaporated in the last week," the analyst underscored. "I think that with the way we passed through $75, it looks pretty clear that we have some lower levels ahead of us in the immediate term. But whether or not it's going to play out into a significant drop from here remains to be seen."
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