MW: Oil futures drop as sentiment sours on Greek deficit worries
European equities, U.S. stock futures drop as Greek deficit revised higher
By Polya Lesova, MarketWatch
FRANKFURT (MarketWatch) -- Oil futures dropped more than 1% on Thursday, as equity markets posted losses and the dollar strengthened on news that Greece's budget deficit was bigger than previously estimated.
Sentiment in the financial markets has influenced oil-price movements in recent weeks, and sentiment turned sour after Eurostat said the Greek deficit was 13.6% of gross domestic product in 2009, compared with a previous estimate of 12.7%.
The E.U. statistics agency also expressed reservations about the quality of data reported by Greece. The news triggered declines in European equities and U.S. stock futures as well as the euro, while it boosted the U.S. currency. Read more on Greece.
Crude oil for June delivery dropped $1.21, or 1.4%, to $82.47 a barrel in electronic trading on Globex. Earlier, it hit an intraday low of $82.36 a barrel.
"Two major factors are contributing: the weakness of the equity markets, which have been extremely strongly correlated with commodities and oil over recent days, and the second reason is the stronger dollar on the back of the Greece troubles developing," said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt.
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"It drags on the euro, so the dollar becomes stronger and the stronger dollar is negative for commodities," Weinberg said. He expects oil prices to weaken further in the short term.
The euro fell 0.5% to $1.3323 in recent trading. The dollar index (DXY 81.51, +0.35, +0.43%) , which tracks the performance of the greenback against a basket of other major currencies, rose 0.5% to 81.535.
Oil prices extended their losses after data showed that U.S. weekly jobless claims declined, while producer prices rose in March.
The number of people filing an initial claim for unemployment benefits dropped by 24,000 last week to a seasonally adjusted 456,000, the first drop in three weeks, according to government data released on Thursday.
Separately, U.S. wholesale prices rose by a seasonally adjusted 0.7% in March, reversing a drop in February, the Labor Department estimated.
Data on existing-home sales is still due for release later in the session.
Oil futures finished marginally lower on Wednesday after the U.S. government reported build-ups in petroleum inventories.
Crude-oil inventories rose 1.9 million barrels in the week ended April 16, while analysts surveyed by Platts were expecting a gain of 300,000 barrels. Distillate and gasoline stockpiles also increased.
Also on Globex Thursday, May natural-gas futures fell 1 cent to $3.94 per million British thermal units.
The Energy Information Administration will report data on natural-gas in storage later in the morning. Analysts are looking for an injection of 78 billion cubic feet.
