MW: Oil falls as much as 4% as demand concerns prevail
By Myra P. Saefong & Polya Lesova, MarketWatch
WASHINGTON D.C. (MarketWatch) -- Crude-oil futures fell as much as 4% Monday as traders continued to worry about the impact of a global economic slowdown on energy demand.
"Oil prices and its moves this year have reflected these times of historic upheaval in the world economy," said Phil Flynn, a vice president at Alaron Trading, in a note to clients. This is "all about the price of oil adjusting itself to a new world economic order and the price of oil adjusting to the fears and the constantly evolving economic crisis."
Crude oil for December delivery fell to a low of $65.15 per barrel in electronic trading on Globex. It was last down $1.81, or 2.7%, at $66.
On the New York Mercantile Exchange, December crude was last at $65.70, down $2.11.
"On the bullish side, we think markets are still trading in the shadow of U.S. equities, which have had a distinctly better tone to them in recent days," Edward Meir, an analyst at MF Global, wrote in a research note.
"On the bearish side, we suspect that any equity-induced gains in energy will start to fade late in the week and into next, as funds may choose to sell into the rallies given the recession realities that are still out there," Meir said.
Last week, oil prices rose nearly 6%. However, crude's front-month contract still saw a drop of 32.6%, or $32.83, for the month of October -- the biggest monthly decline recorded on Nymex since trading began in 1983. See full story.
"Oil prices continue to drop as a direct relationship between a weak global economy and demand," said Mark T. Williams, a risk management expert and finance professor at Boston University.
But "the real story is how will [the Organization of the Petroleum Exporting Countries] react, and will they become more aggressive in restricting supply," he said in emailed comments.
"Should they become more aggressive in supply quotes, how will this impact the economy? In particular, the global economy is vulnerable and such OPEC-imposed quota restriction could push the economy in even a deeper recession, further pushing down oil prices," he said.
Ongoing pressure
Meanwhile, the energy market continues to see "indications of falling Asian demand," said James Williams, an economist at WTRG Economics. "There is a report that the largest Chinese refiner will process less crude at some facilities because of lower demand. Imports to Korea are down. Also, the purchasing manager's index in China fell."
"It may take an extremely cold winter to boost [energy] consumption and put the oil bears into hibernation," he said in emailed comments. "To the oil bears, bad economic news is like finding a honey tree."
Other energy futures declined also with crude on Globex Monday. December reformulated gasoline futures fell 6.7 cents to $1.4288 a gallon and December heating oil futures shed 4.9 cents to $2.0353 a gallon.
December natural gas futures fell 18.6 cents, or 2.7%, to $6.597 per million British thermal units.
On Wall Street Monday, U.S. stocks traded mainly higher, with the market bracing for another week of rocky data and earnings. The Dow Jones Industrial Average edged upward.
Currency markets continued to take their cue from equities, with the dollar and yen retreating against most major counterparts as rebound in risk appetite provided modest support for Asian and European stocks.
The dollar index , which tracks the performance of the greenback against a trade-weighted basket of currencies, fell to 85.79 from 85.834 in late North American trading Friday. See Currencies.
The Reuters/Jefferies CRB Index , a benchmark gauging the prices of major commodities, fell 1% to 265.61 points.
Gold futures climbed back above $730 an ounce.
