Oil Tests Near $70 on Stronger Dollar, Econ Fears

After slipping below $70 during earlier trading on the New York Mercantile Exchange, crude oil futures, pressured by a triumphant greenback and persistent economic concerns, ultimately closed slightly above $71 ahead of the weekend.

With the oil markets zeroing in on weak gasoline demand, the price of light, sweet crude oil for March delivery continued its steep decline from record highs near $80 to settle down more than $2 today at $71.19 a barrel.

Fading alongside the commodities markets on Friday, U.S. stocks were knocked down to new lows on the session, while the dollar, up by 0.82%, strengthened once more against a battered euro.

Both the equities and commodities markets put in a less-than-stellar performance as investors tightened their purse strings after mixed government employment data revived risk aversion.

Wall Street Eyes Global Economy

"It's kind of a what came first, the chicken or the egg, scenario. The Dow Jones has been coming under a great deal of pressure and that's increasing doubts about economic growth and crude oil demand," reflected Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska.

"However," the analyst continued, "stock analysts are arguing that the Dow Jones is coming down because energy is coming down, so they are both weighing on each other at this point. I am going to lean on the idea that the stock market is looking at the global economy as a whole and is not overly impressed. It's coming down after having extended its rally and as a result, money is coming out of some of these commodity markets."

"Fundamentally, the crude oil market is not overly bullish right now and still has a contango, but it's not as bearish as other markets. At some point, when this liquidation tied to the Dow starts to slow, I think you're going to see some support coming back into this market on the idea that Spring/Summer demand is going to pick up," Newsom contended.

On the opposite side of the energy coin, natural gas spot prices at the Henry Hub for March delivery posted a positive movement on the NYMEX to settle higher at $5.515 per thousand cubic feet.

According to Newsom, the natural gas market is seeing an uptick in demand for the week spurred by a blast of arctic air due to arrive in the mid-Atlantic states this weekend. Additionally, forecasts indicate that icy weather conditions will drop temperatures across the Midwest and Northeast next week.

In spite of rising demand on the domestic natural gas front, the analyst was quick to point out that demand led by colder weather will be relatively short-lived.