Contract's set for weekly loss of 7%; natural-gas futures down 9% on week
By Myra P. Saefong & Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) -- Poised to suffer a loss of about 7% for the week, crude-oil futures fell Friday as grim economic news from around the world fed into growing expectations for a slowdown in energy demand.
Natural-gas futures also moved lower, with a bigger-than-expected buildup in last week's U.S. supplies setting the market up for a weekly price loss of more than 9%.
Oil prices found little support from reports that the Organization of the Petroleum Exporting Countries will hold an emergency meeting this month to discuss the possibility of further production cuts among cartel members.
"The psychology seems to hold that the full extent of the current recession is yet to be fully felt," Michael Fitzpatrick, an analyst at MF Global, told clients. "The subsequent falling-demand scenario necessarily leads to an assumption that oil markets are oversupplied, in which case OPEC is right to curtain production."
But if it turns out that OPEC's "incorrect and the market is running ahead of fundamentals, then the eventual reversal may be sharp enough to curtail an accompanying recovery," he said.
The cartel will hold an emergency meeting in Cairo on Nov. 29, about three weeks ahead of a meeting scheduled to take place in Algeria, according to media reports Thursday. OPEC implemented a reduction of 1.5 million barrels on Nov. 1.
Against this backdrop, crude for December delivery fell $1.42 to $56.82 a barrel in electronic trading on Globex.
"Oil prices were a little lower as concerns over weakening energy demand amid slowing global economies continued to weigh on sentiment," said analysts at Sucden Research in a note.
On Thursday, crude rose $2.08, or 3.7%, to close at $58.24 a barrel on the New York Mercantile Exchange, reversing course after trading at a 22-month low of $54.67 on an intraday basis.
World of economic woe
Bleak economic news streamed in from around the world, heightening oil traders' worries that a global recession will translate into softer growth in energy demand.
For starters, the Commerce Department estimated that U.S. retail sales plunged a record 2.8% in October as sales of autos and gasoline plummeted. See full story.
U.S. consumer sentiment ticked higher in early November from the prior month, but it remains at relatively low levels, according to a media report on the University of Michigan/Reuters index. See full story.
And across the Atlantic, the 15-nation euro zone plunged into its first recession since the debut of the single currency nearly a decade ago,. See full story.
On Thursday, the International Energy Agency said it expects global demand to grow by 120,000 barrels to 86.2 million barrels a day in 2008, down 330,000 barrels from its previous daily forecast. Read more.
In the U.S., total demand for petroleum products over the past four-week period averaged 19.1 million barrels a day, down 6.6% from the same time a year ago, the Energy Information Administration said Thursday. See full story.
On Globex Friday, prices for petroleum products were ready to finish the week significantly lower.
December heating oil went for $1.8395 a gallon, down 3.5 cents, while December reformulated gasoline fell 6.6 cents to $1.2369 a gallon.
The average U.S. retail price for a gallon of regular gasoline fell to $2.152 on Friday, off from $2.178 on Thursday and down more than 30% from a month ago, according to AAA's Daily Fuel Gauge Report.
With gasoline demand in decline, U.S. refineries aren't working as hard as they usually do ahead of the winter heating season, but high demand for diesel may help quell some worries about a shortage of other distillates, including heating oil. See Commodities Corner.
Weak natural gas
Meanwhile, prices for natural gas continued to decline after the EIA reported on Friday that supplies of the commodity climbed by 62 billion cubic feet for the week ended Nov. 7.
Analysts at IHS Global Insight had anticipated an increase in the amount of gas in storage of 40 billion cubic feet for the week.
"The bears are on the prowl now," said Beth Sewell, managing partner at Quantum Gas & Power Services. "Actually I wouldn't be surprised to see another injection report next week since weather's been so mild."
December natural gas futures fell 18.3 cents, or 2.9%, to $6.135 per million British thermal units. It tapped a nearly three-week low of $6.05 earlier.
Total natural-gas stockpiles now stand at 3.467 trillion cubic feet, down 72 billion cubic feet from the year-ago level but 117 billion cubic feet above the five-year average, the government's data showed.
"It's turning colder starting this weekend so I think this week is pretty much the last of the injections," said Sewell. "So the week after next, just in time for December settlement, we may start to see withdrawals."
Elsewhere in commodities, gold futures soared 5%, boosted by safe-haven demand amid ongoing volatility in financial markets.
