MW: Oil futures fall 5% to trade below $48 a barrel
Oil prices fell 5% to trade below $48 a barrel on Monday, as U.S. dollar strength, falling stock futures and ongoing concerns about the global economy pressured the energy market.
Crude oil for May delivery fell $2.58, or 5%, to $47.68 a barrel in electronic trading on Globex. The contract will expire on Tuesday.
Crude oil for June delivery, which registered more volume, dropped $2.34, or 4.4%, to $50.14 a barrel.
"Today, the dollar is a bit higher as well as the stock market is down, so you're getting hit on the two fronts that have been moving oil prices," said Phil Flynn, vice preside at Alaron Trading in Chicago. Flynn expects "more choppiness" from oil trading this week.
'Tomorrow is expiration of the May contract -- that will create more volatility," he said. "If the stock market stabilizes, we'll see the price of oil start to come up."
On Wall Street, U.S. stock futures slipped on Monday, with traders taking profits off the table. Better-than-expected earnings from Bank of America were not enough to dispel the bearish sentiment. See Indications.
In the currency markets, the U.S. dollar rose against the euro and the British pound on Monday, as the head of the European Central Bank signaled that policy makers are weighing a further rate cut and will announce new measures at its May meeting.
The dollar index , which tracks the greenback against a trade-weighted basket of rival currencies, pushed higher to trade at 86.42 in recent action, after having finished below 86.00 last week.
Dollar strength typically weighs on dollar-denominated commodities such as oil because it makes them more expensive for holders of other currencies.
"A stronger U.S. dollar and renewed concerns regarding an economic recovery once again drove oil prices down," said analysts at Commerzbank. "This weekend, the IMF [International Monetary Fund] announced that it will have to make further downward revisions to its global economic outlook."
The analysts expect oil prices to fluctuate between $45 a barrel and $55 a barrel in the short term.
Also on Globex, May reformulated gasoline fell 4 cents to $1.45 a gallon and May heating oil dropped 5 cents to $1.37 a gallon.
May natural gas futures dropped 8 cents to $3.65 per million British thermal units.
