Crude Ends Slightly Lower, Capping Down Week

NEW YORK (Dow Jones Newswires), Dec. 16, 2011

Crude-oil futures edged lower Friday, capping a week of steep declines spurred by growing worries about slowing oil demand.

The decline marks the third straight downward session for benchmark U.S. crude and its lowest finish in six weeks. Futures fell 5.9% this week alone.

Light, sweet crude for January delivery settled down 34 cents, or 0.4%, to $93.53 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe recently traded up 36 cents, or 0.3%, to $103.96 a barrel.

Crude-oil futures spent the week buffeted by signs that the anemic global recovery is weighing on crude-oil demand. A report showing weak gasoline demand in the U.S. spurred a steep sell-off on Wednesday that continued for two straight days. Meanwhile, concerns about Europe's sovereign debt crisis remain at the forefront of traders' minds.

"It's nothing but bad news out there," said Ray Carbone, president of the oil options brokerage Paramount Options in New York.

On Friday, futures spent most of the day unchanged, but tipped lower after U.S. stocks gave up earlier gains. The two markets have been highly correlated for much of the year, as oil traders look to the stock market as a barometer of broader economic sentiment.

Thin trading volumes made it difficult to assign too much weight to any single move, market watchers said.

"It's an equity correlation, but we are in the holiday trading season now," said Carl Larry, president of Oil Outlooks and Opinions. "After that wild move earlier this week up and down, people are just waiting until next week."

The Dow Jones Industrial Average recently fell 0.1% to 11862. The blue-chip index had earlier risen as high as 11968 earlier in the session.

Still, much of the week's trading has been dominated by concerns that the weak global recovery is weighing on oil demand. On Wednesday, a report from the Department of Energy showed an unexpectedly large build in U.S. gasoline inventories the previous week, implying weak demand in the world's biggest oil consumer. Oil demand fell 1.8 million barrels a day in the week, while oil imports fell 1.1 million barrels, according to the DOE.

"There's clearly an energy consumption depression in the U.S.," said Kyle Cooper, managing partner at IAF Energy Advisors in Houston. "Anybody who says otherwise is just not looking at the data."

Highlighting those concerns, the Organization of the Petroleum Exporting Countries at a meeting this week agreed to maintain its current output levels. The group, which controls bout a third of the world's oil production, sounded caution about the market's outlook, saying global oil demand was likely to "increase slightly" next year.

"They acknowledged the downside risk, and they are taking action," said Jason Schenker, president of Prestige Economics, a consultancy in Austin, Texas.

Front-month January reformulated gasoline blendstock, or RBOB, settled down 0.07 cent to $2.487 a gallon. January heating oil settled down 2.2 cents, or 0.8%, to $2.8005 a gallon. 

Copyright (c) 2011 Dow Jones & Company, Inc.