MW: Oil falls over 4% as economic concerns dominate
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Crude-oil futures fell more than 4% Tuesday, as concerns about the health of the global economy and its impact on energy demand sparked selling among traders.
Crude for December delivery fell $2.86, or 4.7%, to $59.54 a barrel in electronic trading on Globex.
Earlier, the contract hit an intraday low of $59.26 a barrel.
"Bullish news today on top of the recent Chinese stimulus package and news of Saudi Arabia's supply cuts failed to overcome economic concerns," said Sucden Research analyst Michael Davies.
Traders have been worrying in recent weeks that a sharp slowdown in global growth will inevitably spell reduced demand for oil.
"News this morning that China's crude-oil imports jumped by 28% in October from a year ago and that militants are threatening to renew attacks on oil facilities in Nigeria failed to lift prices," Davies wrote in a note to clients.
On Monday, crude rose 2.2% to close at $62.41 a barrel on the New York Mercantile Exchange.
China disclosed plans Sunday for a $586 billion economic-stimulus package aimed at reversing slowing growth in the world's most populous country. Energy traders were encouraged by the prospect of increased energy demand growing out of the plan.
In another bullish development, Saudi Arabia has reportedly told refiners in Asia that it would cut December supplies by 5%, the first such cutback in 14 months, according to Reuters.
Saudi Arabia is the largest oil producer within the Organization of the Petroleum Exporting Countries cartel. Last month, OPEC members agreed to cut the output quota of 28.8 million barrels per day by 1.5 million barrels starting Nov. 1.
Mexico hedges exports: report
Mexico hedged almost all of next year's oil exports at prices ranging from $70 to $100 at a cost of about $1.5 billion through derivatives contracts, the Financial Times reported on its front page Tuesday, citing bankers familiar with the deal.
In contrast, Mexico hedged only between 20% and 30% of its exports last year, the Financial Times reported.
Mexico is the sixth-largest oil producer in the world and a huge chunk of government revenues depend on oil profits.
"This is a clear sign that they [Mexico] fear oil prices will remain below $70 a barrel in 2009," said Kathy Lien, director of currency strategy at GFT Forex. "Even though the report only talks about Mexico, we doubt that they are the only oil producing country to start hedging."
Also in Globex trading Tuesday, December reformulated gasoline fell 7 cents, or 5%, to $1.30 a gallon and December heating oil dropped 8 cents to $1.93 a gallon.
And natural gas for December delivery sank 27 cents to stand at $6.97 per million British thermal units.
