MW: Crude falls on worries over economy, General Motors
Crude-oil futures fell sharply Monday, as indications that the Group of 20 nations are unlikely to call for further economic-stimulus measures rekindled concerns that a slow recovery in global growth will continue to weigh on energy demand.
Worries over a possible bankruptcy for troubled automakers General Motors and Chrysler LLC also put downward pressure on energy prices.
Crude for May delivery dropped $2.27, or 4.4%, to $50.10 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday low of $49.95 a barrel.
"I think oil is trading lower today due to the shocking news out of the auto industry and the implications for demand if GM and/or Chrysler fall within the next 60 days," said Zachary Oxman of TrendMax Futures.
"I think the market sees that this recession is nowhere near over," he said.
On Wall Street, U.S. stocks fell sharply at the open, retreating after the White House said bankruptcy was a possibility for GM and Chrysler, while hopes for a new round of stimulus spending appear thwarted.
Worries for GM and Chrysler escalated after the White House said a structured bankruptcy plan for the two automakers could give them their "best chance at success." Also, Rick Wagoner was ousted as GM's chief executive.
Leaders of the world's 20 largest industrialized and developing economies will meet later this week in London.
Leaks of drafts of the meeting's final communiqués and remarks by politicians, including President Barack Obama, indicated that a push by the United States and Britain for a further round of coordinated, global stimulus stimulus was unlikely to bear fruit. Read more.
Instead, the meeting is expected to produce strong language pledging to avoid protectionism, restore growth and reform financial markets and institutions.
Worries over a slow recovery in the global economy tend to weigh on energy prices.
Crude futures fell nearly 4% on Friday, but the benchmark contract finished last week up 0.6%.
Also applying pressure was strength in the dollar. The dollar index , a measure of the greenback against a trade-weighted basket of rival currencies, rose to 85.77 from 85.138. See Currencies.
Also in Monday's Globex action, April reformulated gasoline fell 5 cents to $1.44 a gallon and April heating oil dropped 4 cents to $1.40 a gallon.
Natural gas for April delivery gave up 1 cent to stand at $3.94 per million British thermal units.
