Oil hits two-month low
NEW YORK – A nine-month rally in oil prices could be faltering as a gradual sell-off that began in late October gains momentum.
Crude prices, which doubled from March to October, fell Friday for the eighth day in a row. The contract for January delivery gave up 67 cents to settle at US$69.87 a barrel on the New York Mercantile Exchange. It's the first time that oil settled below $70 a barrel since early October.
Prices hit two-month lows as the U.S. dollar gained strength and investors took a second look at paltry demand figures in the West.
All energy prices were in retreat despite a report Friday from the International Energy Agency saying global oil demand will rise next year more than previously expected. Analysts said they've heard such talk before, and they're now looking for concrete signs of demand from both consumers and industry.
"How do you know when the economic recovery really begins? It is when real oil demand growth appears," analyst Phil Flynn said in a report. "Not just artificial demand growth being propped up with smoke and mirrors, but demand growth that comes with solid economic activity and global growth."
The IEA, an energy watchdog for some of the biggest crude consuming countries, said Friday that it was raising its estimates for 2010 global oil demand because of increased economic activity in Asia and the Middle East.
The Paris-based organization said in its monthly report that crude demand would reach 86.3 million barrels a day in 2010, up 1.7 per cent from 2009. Last month, the IEA forecast oil demand of 86.2 million barrels a day in 2010.
Meanwhile, the U.S. dollar has surged on a drop in U no fax cash advance.S. unemployment and an anticipation that the Federal Reserve may raise interest rates.
Oil contracts, which are priced in U.S. currency, tend to move in the opposite direction of the U.S. dollar.
Crude had jumped as high as $82 a barrel in October. Since then, oil prices have slumped 13 per cent. U.S. consumption of petroleum products including heating oil and diesel, has fallen about 20 per cent from a year earlier, Barclays Capital said in a report.
"It is really the lack of inspiration in distillate demand that stands out, showcasing the lack of cold weather and no turnaround yet in trucking activity in the U.S.," Barclays said.
Retail gasoline prices are also nearing two-month lows.
Pump prices fell by less than a penny overnight to a new national average of $2.623, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 3.1 cents cheaper than a month ago and 95.9 cents more expensive than last year.
In Canada, the price at the pump averaged 98.5 cents Canadian per litre, down from $1.025 per litre a month ago, according to price-watching website GasBuddy.com.
In other Nymex trading in January contracts, heating oil added less than a penny to settle at $1.9085 a gallon while gasoline added less than a penny to settle at $1.8416 a gallon. Natural gas fell 13.5 cents to settle at $5.163 per 1,000 cubic feet.
In London, Brent crude for January delivery added two cents to settle at $71.88 on the ICE Futures exchange.