MW: Crude tumbles 7% as U.S. auto-rescue plan founders
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Crude-oil futures tumbled 7% Friday, a reversal after rallying more than 10% in the previous session, as last-ditch plans for a bailout of the U.S. auto industry collapsed.
Crude for January delivery fell $3.25 to stand at $44.74 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday low of $44.40 a barrel.
"Risk aversion set in after the auto industry bailout hit a snag when Senate negotiations failed late last night," said Nimit Khamar, an analyst at Sucden Financial, in a note.
A $14 billion bailout deal to aid the struggling Big Three automakers collapsed in the Senate, as a dispute over union wages derailed hopes for a compromise between Republicans and Democrats who'd worked feverishly to throw Detroit a lifeline. See full story.
On Wall Street, U.S. stock market futures slumped as shares in car makers got sent tumbling in pre-open trading, signaling a decidedly weak open for stocks as a whole. See Indications.
In Asia overnight, a week of solid gains ended on a sour note Friday as stocks got punished. See Asia Markets.
The Senate's rejection of extending loans to the Big Three "raised concern of a prolonged recession," said analysts at Action Economics.
"The failure of the rescue package increases the risk of bankruptcies in the automobile industry, which worsens the outlook for the labor market and production in the world's largest oil consumer," they said.
On Thursday, oil futures had rallied fully 10.2% to end at $47.98 a barrel on the New York Mercantile Exchange, propelled along by sharp weakness in the dollar and expectations that the Organization of Petroleum Exporting Countries will deliver a significant production cut next week.
OPEC's widely expected to agree on a cut in member nations' quotas at its meeting next Wednesday. In October, the oil cartel announced a production cut of 1.5 million barrels a day but left output levels unchanged at its November meeting.
Also on Globex Friday, January reformulated gasoline fell 6 cents, or 6%, to $1.01 a gallon and January heating oil dropped 6 cents, or 4%, to $1.45 a gallon.
Natural gas for January delivery also fell, off 11 cents, or 2%, to $5.49 per million British thermal units.
