Nymex Crude Retreats After ECB News
Crude-oil futures slid Thursday on disappointment that the European Central Bank didn't announce new measures to stimulate the euro-zone economy, raising worries about global oil demand.
Light, sweet crude for September delivery settled down $1.78, or 2%, at $87.13 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently traded 23 cents, or 0.2%, lower at $104.46 a barrel.
At a press conference, ECB President Mario Draghi said that the central bank will keep interest rates unchanged but not implement new stimulus measures, disappointing investors who had hoped he would announce stronger steps to strengthen Europe's economy.
Oil slumped as low as $86.92 a barrel on the news. "The market had been pumped up on the expectation that Mario Draghi was going to work his magic," said Phil Flynn, analyst at Price Futures Group in Chicago. "After all was said and done, he didn't really do anything."
A stronger dollar, which makes dollar-traded oil more expensive to investors using other currencies, also kept buyers out of the market, said Tariq Zahir of Tyche Capital Management. The Wall Street Journal Dollar Index, which tracks the U.S. dollar against a basket of currencies, was recently at 72.241, up from 72.076 late Wednesday.
The comments from the ECB come a day after the U.S. central bank also decided to hold off on fresh stimulus measures.
All eyes are now on U.S. nonfarm payrolls data to be released Friday, when investors will look for clues about U.S. economic strength and demand for oil. As the end of summer driving season approaches, U.S. demand could "fall off a cliff" in the coming weeks, said Mark Waggoner, president of Excel Futures.
Meanwhile, front-month September reformulated gasoline blendstock, or RBOB, defied the downward trend of other commodities to settle 3.54 cents, or 1.3%, higher at $2.8696 a gallon. Due to tighter gasoline supplies in the Midwest and East Coast, "the strength in the RBOB futures has quietly evolved as a major supportive force" among energy futures, Jim Ritterbusch of Ritterbusch & Associates said in a note.
September heating oil fell 1.65 cents, or 0.6%, to settle at $2.8423 a gallon.
The profits from refining a barrel of crude oil into RBOB and heating oil--known as crack spreads--both rose to their highest prices since April. The September gasoline crack spread was recently up 9.7% at $33.04 a barrel, while the September heating oil crack spread was up 3.1% at $32.12 a barrel.
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