Oil at Lowest in 2 Weeks as Demand Concerns Weigh
Oil futures fell to their lowest level in two weeks Monday, dragged by weaker equities and persistent concerns about economic growth.
Light, sweet crude for November delivery settled lower by $1.32, or 1.5%, at $88.73 a barrel on the New York Mercantile Exchange. That marks the lowest settlement for front-month crude since Oct. 3.
With the expiration of the November contract the close of trading, the more actively traded December contract settled lower by $1.79, or 2%, at $88.65 a barrel.
Brent crude on the ICE Futures exchange recently settled 70 cents, or 0.6%, lower at $109.44 a barrel.
Traders sent oil futures on a steep slide for a second straight session as concerns about weak oil demand overwhelmed signs of worsening tensions in the Middle East. No single factor was behind the day's drop, they said, but steady production coupled with weak oil demand have battered the oil market in recent weeks.
"We know the U.S. isn't going to grow very much next year, and this is coupled in an environment where you're going to see higher production," said Andy Lebow, senior vice president of energy futures at Jefferies Bache in New York. "You're looking at a confluence of bearish factors."
Over the weekend, Japan's finance ministry showed a steep drop in exports to China, as a territorial dispute threatens to worsen an economic slowdown in both countries. Japan is the world's No. 3 crude user, behind the U.S. and China.
Meanwhile on Monday, TransCanada Corp. was slated to restart its Keystone pipeline, which connects the Nymex delivery point of Cushing, Okla., with prolific Canadian oil sands fields. The pipeline has become a major source of oil supply for the central U.S.
Futures were also hit by weakness in the equities market, which many commodities traders turn to for a barometer on broader economic sentiment. The Standard & Poor's 500 Index was recently down 0.4% at $1,427, dragged a reduced profit forecast from industrial bellwether Caterpillar.
"We're definitely not finding any strength there," Carl Larry, president of Oil Outlooks and Opinions in New York, said of the slide in the stock market.
Reports of additional violence in the Middle East over the weekend failed to stem the losses in the oil market. Lebanon was gripped by protests after the country's spy chief was killed in a bombing that has been blamed on Syrian officials.
The violence comes on the heels of recent border skirmishes between Syria and Turkey, and underscores fears that Syria's internal conflict is spreading to its neighbors. Although none of the countries affected are large oil producers, traders have been closely monitoring the events because of its potential to disrupt supply routes or production elsewhere in the region.
Front-month November reformulated gasoline blendstock, or RBOB, settled 4.88 cents, or 1.8%, lower to $2.6375 a gallon. November heating oil settled 5.78 cents, or 1.8%, lower at $3.0767 a gallon.
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