Prices for petroleum products, natural gas also pulling back
NEW YORK (MarketWatch) -- Crude-oil futures dropped early Tuesday, paring some of the strong gains that the benchmark contract generated in the previous session, as concerns over a slowdown in energy demand weighed on sentiment.
Crude for January delivery fell $1.05, or 1.9%, to $53.45 a barrel on the New York Mercantile Exchange. It had slumped nearly 7% earlier to an intraday low of $50.79 a barrel, as a rising U.S. dollar contributed to the downfall. The greenback has since erased gains, in turn paring losses in dollar-denominated crude.
"Demand concerns once again returned to the forefront," wrote Nimit Khamar, an analyst at Sucden Research, in a note to clients.
Crude had rallied more than 9% to start the week, marking the biggest one-day percentage gain in nearly three weeks, amid what Khamar called "euphoria" over the U.S. government's bailout of embattled financial-services giant Citigroup, but this gave way to traders taking profits on Monday's surge.
In foreign-exchange trading Tuesday, the dollar index , which tracks the value of the greenback against its major rivals, lost 1.4% as market participants reacted to fresh moves by the Federal Reserve to stimulate lending in the U.S. economy. See Currencies.
Dollar weakness typically spells gains in the prices of commodities such as oil and gold, also denominated in dollars, because they become less expensive for holders of other currencies.
Also figuring in the trading in crude, the Commerce Department said the economy contracted at a 0.5% annual rate in the third quarter, worse than the 0.3% initially estimated a month ago. See Economic Report.
Worries have been rising that an economic slowdown will cut into oil demand.
The U.S. Energy Information Administration will release new petroleum inventories and demand data on Wednesday. Last week, the EIA said demand for motor gasoline over the four weeks ended Nov. 14 dropped 2.2% from a year ago.
More economic data to be released ahead of the Thanksgiving holidays are "likely to further highlight the gloomy economic conditions faced by the U.S.," Khamar said.
Other energy futures
Other energy futures also fell Tuesday. December reformulated gasoline dropped 2.1% to $1.1190 a gallon, while December heating oil fell 2% to $1.7492 a gallon and December natural gas dropped 3.3% to stand at $6.66 per million British thermal units.
Energy traders have on their radar screens the upcoming meetings of the Organization of Petroleum Exporting Countries. The oil cartel is scheduled to meet Saturday in Egypt and again on Dec. 17 in Algeria.
OPEC President Chakib Khelil had said that the cartel should cut production by 1 million barrel a day at the meetings, but some analysts said OPEC is still well behind the curve.
The cartel is "playing a frantic game of 'catch-up' in a market that is more than well supplied," said Edward Meir, an analyst at MF Global.
In other news, U.S. average gasoline prices fell below $1.90 a barrel on Tuesday, according to the AAA Daily Fuel Gauge Report. The current average price stands at $1.89 a gallon, down from $1.91 on Monday.
A month ago, gasoline sold for $2.70 a gallon. A year ago, it retailed for $3.09 a gallon.
