MW: Crude futures down 5% as stocks drop, dollar gains
Crude-oil futures surrendered 5% Friday, pressured by falling equity markets, strength in the dollar and more grim data about the U.S. economy.
Crude for April delivery dropped $2.20 to stand at $42.99 a barrel in electronic trading on Globex.
"Oil prices are falling after three days of gains, as stock markets drop on renewed recession fears and growth concerns," said analysts at Action Economics.
Also, a stronger greenback's reducing the appeal of commodities priced in dollars, they said.
The dollar traded higher against most major currencies, gaining ground as safe-haven flows resumed amid renewed falls by equity markets. See Currencies.
On Wall Street, stock futures tumbled as the third government rescue plan for Citigroup wasn't taken as a charm by traders, and as the government reported economic data that showed the worst contraction in U.S. gross domestic product since 1982. See Indications.
GDP fell at a 6.2% seasonally adjusted annualized pace in the final three months of 2008, revised from the initial estimate of a 3.8% drop. See Economic Report.
On Thursday, crude futures had rallied 6.4%, claiming their highest level in one month.
"We think oil prices will likely test the $50-$52 resistance band heading into the OPEC meeting," said Edward Meir, an analyst at MF Global.
"We have our doubts that the price advance will continue much beyond that, as participants will eventually have to come to terms with the fact that we are still mired in global recessionary conditions," Meir said.
The United Arab Emirates, the third-biggest producer in the Organization of Petroleum Exporting Countries, said Thursday that it will cut its April production by 15% to 17%, Dow Jones Newswires reported.
OPEC will meet in March to discuss whether to further reduce member nations' quotas. The cartel already has announced a reduction of 4.2 million barrels a day since September, equivalent to about 5% of global oil demand.
Also on Globex, March reformulated gasoline fell 2 cents to $1.28 a gallon and March heating oil dropped 1 cent to $1.29 a gallon. Both contracts will expire at the end of trading on Friday.
Natural gas for April delivery also fell, down 7 cents to $4.01 per million British thermal units.
