Commodity Corner: Oil Tumbles on Lingering Debt Concerns
Light, sweet crude futures fell Tuesday as concern over the European debt crisis resurfaced after the euro plummeted to its lowest level in 10 weeks.
Led by declines in heating oil and gasoline futures—which expired at close—crude tumbled more than a dollar a barrel in the last half hour of Tuesday's trading session. Oil prices for January delivery settled at $84.11 a barrel, 1.9 percent lower than Monday.
Fear lingers as investors worry that other countries, such as Spain, Portugal, or Italy, might also need financial assistance after Ireland’s massive bailout package earlier this week.
The euro lost 0.9 percent Tuesday, hitting a two-month low against the dollar. The greenback rose 0.5 percent on the U.S. dollar index, which gauges the dollar to an array of six other currencies. As the dollar strengthens, crude becomes more expensive for foreign buyers and dollar-denominated commodities lose their appeal.
The intraday range for crude futures was $83.55 to $85.90 Tuesday.
Front-month December gasoline settled nearly two cents lower at $2.26 a gallon on the New York Mercantile Exchange. The December contract for gasoline expired at Tuesday's settlement.
In spite of the global economic crisis, gasoline gained 6.3 percent this month—the largest since September. Gasoline fluctuated between $2.23 and $2.28 Tuesday.
Natural gas futures also tumbled Tuesday, as stockpiles exceeded expectations of an increase in heating demand due to the forecasted colder-than-normal temperatures. Although natural gas prices typically correlate with heating demand in the winter, analysts predict that the surplus in supplies has limited rallies; however, they remain uncertain about long-term predictions.
January Natural gas traded lower for the second consecutive session at $4.18 per thousand cubic feet. It peaked at $4.25 and bottomed out at $4.13 Tuesday.