Crude Hits Two-Month Low on Firmer Dollar, Demand Woes
Falling for the eighth consecutive session, U.S. crude oil futures tumbled to just under $70 a barrel on the New York Mercantile Exchange Friday, pressured by a stronger dollar's renewed safe-haven demand.
Ultimately hitting a two-month low, the price of light, sweet crude oil settled 67 cents lower than yesterday's final price tag to $69.87 on the NYMEX. Although still above the $5-threshold, natural gas spot prices at the Henry Hub closed down today at $5.163 per thousand cubic feet.
Dollar Packs a Punch Following Week-Long Beatdown
"The oil market continues to decline, and what predominated today was the rebound we had in the dollar after morning trading commenced," noted Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
"Overnight it looked as if we were going to get some weekend short covering from the slide we had, and the market pushed back above $71, but it basically couldn't hold any of its gains," the analyst reflected.
During today's earlier session, crude futures rallied slightly on positive economic data indicating an improvement in China's economy, increased oil demand and a more bullish 2010 oil demand forecast out of the International Energy Agency, Reuters reported.
However, oil prices could not hold above $70 as purchasing for the energy commodity decelerated once the dollar's value trumped the euro, paring its losses ahead of the weekend.
"I think some of the factors the market has seemed to shrug off in the prior couple of months are being paid closer attention to, and that's why oil prices are under pressure right now," McGillian said.
Specifically, oil prices have recently been weighed down by concerns over ample domestic crude supplies in the U.S., which were underscored by an additional build in distillates and gasoline stocks reported by the EIA earlier this week.
"You also have to remember that, as we exit the year, oftentimes in the market you have a bit of position marking where people who have profitable trades have to book some of their profits for calendar-year purposes," McGillian added.
He continued, "Because we've had such a highly correlated relationship between the financial complex and oil, you're seeing that play out as we exit the year. And with the dollar rebounding and oil prices coming off, people who had some money on the table wanted to take it off. But heading into the holidays, that should subside a bit."