Crude Exits December Contract at Trading Range Lows

Crude oil futures continued to retreat on the New York Mercantile Exchange Friday due to a resurgence in the greenback's value and Wall Street's third consecutive day of declines as economic concerns weighed on the market.

On the final day of its December contract, the price of light, sweet crude oil settled lower at $76.72 on the NYMEX, or nearly 75 cents less than yesterday's final price tag. Trading under the January 2010 contract was slightly better with crude closing at $77.47 a barrel.

Additionally, natural gas futures held on to yesterday's gains on the NYMEX, closing higher at $4.424 per thousand cubic feet.

Paring its weekly losses today, the U.S. dollar strengthened once more against a basket of foreign currencies, spurring investors to lose their buying enthusiasm for the energy commodity ahead of the upcoming holiday week.

Energy Markets Burdened by Ample Crude Supplies

"Today was the final day for December crude, and maybe we should have a moment of silence for this market," mused Phil Flynn, vice president in charge of research for PFG Best in Chicago. "I think January is going to pick up the mantle on Monday still locked in the same trading range that we've been in for the last couple of weeks."

Recently, oil prices have gained and lost ground primarily because of its attachment to the broader financial markets and, specifically, the dollar's day-to-day high and low points.

"Every time oil seems to get bullish over the weak dollar, the market seems to be restained from concerns of weakened global demand. In that sense, we're really caught between a rock and a hard place," said Flynn. "On one hand the weak dollar is spurring buying, giving the market support, but then on the other hand ample global supplies keeps bringing resistance to the market on the upside."

Further stoking the market's concerns over dismal demand for refined products, Valero permanently closed the doors at its 210,000 barrel-per-day refinery in Delaware City, Delaware.   

Oil Traders Trapped in 'Macroeconomic Groundhog's Day'

Analysts continue to point out that oil is currently locked in a trading range slightly above $76 and just under $80 a barrel, with these trending prices anticipated for the remainder of the year. The financial factors affecting commodity prices also remain unchanged, leading analysts to wonder whether prices will move beyond the current $80-threshold. Consensus is that it won't for the foreseeable future.

"Oil needs some major factor to drive it either higher or lower, and I don't foresee anything happening in the short term," noted Flynn. "If the market doesn't break out of this 'macroeconomic Groundhog's Day,' we're going to be reliving the same story this coming week and probably the next," the analyst contended.

Flynn continued, "The market's not going to rattle from increasing tensions with Iran. Normally that would give the market support, and it's not right now because there's so much extra capacity. The good news is that the economy is getting better, but the bad news is that it's not getting better fast enough to cut into oil supplies, and, as a result, oil has become a pawn in this economic recovery."