MW: Oil futures tumble more than 5% to six-week lows
Broad losses in global stock markets, dollar strength weigh
By Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell more than 5% Thursday, with investors dragging prices to their lowest levels in over six weeks following the Federal Reserve decision to extend debt maturities as unlikely to boost the economy and with it, demand for energy.
Crude-oil for November delivery CL1X -5.70% fell $4.68 a barrel, or 5.5%, to $81.24 on the New York Mercantile Exchange after tapping a low of $80.25. Futures prices haven’t traded at levels this low since Aug. 9.
Crude futures tracked the action in equity markets, which sold off around the globe on Thursday. In the U.S., the Dow Jones Industrial Average DJIA -2.79% traded at 10,771.18, down 354 points, or 3.2%. Read about U.S. stock market action.
“The drop is part of the worldwide economy [which] started with the Hong Kong stock market last night, which followed on through Tokyo, Seoul, and Europe,” said Charles Perry, chief executive officer at energy-consulting firm Perry Management.
On Wednesday, the Federal Open Market Committee said in its statement on monetary policy that the U.S. economy faces “significant downside risks,” spooking financial markets.
Strength in the U.S. dollar also added pressure to crude prices, with the U.S. dollar index DXY +1.22% , which measures the currency against a trade-weighted basket of six other currencies, rose to 78.557 from 77.089 in late North American trading Wednesday.
A stronger dollar usually results in lower oil prices, said Perry, “but I think economy concerns far outweigh everything else.”
The economy is not that weak now, though I may get that way, he said. Right now, there is “plenty of cash around — it is just not being spent.”
Near term, Perry said he’s not that optimistic on oil prices. “Before it all settles out, I expect to see oil prices slowly decline to the $60-$70 range,” he said.
In the previous session, oil settled lower immediately after the conclusion of the two-day meeting of Fed policy makers. See earlier Futures Movers column.
