Crude tallies 3-day loss of more than 3% as ECB cuts forecasts
SAN FRANCISCO (MarketWatch) — Oil futures fell for a third straight session Thursday, as a large increase in U.S. gasoline supplies and concerns over the outlook for energy demand pushed prices back under $87 a barrel.
The European Central Bank cut its outlook on the euro-zone economy, weighing on demand prospects for oil and fueling strength in the U.S. dollar.
Crude oil for January delivery (US:CLF3) fell $1.62, or 1.8%, to settle at $86.26 a barrel on the New York Mercantile Exchange, following a low at $85.68. That was the lowest settlement for a front-month contract since Nov. 15.
“We have been strongly bearish on oil, and we continue to have this outlook,” said Jason Rotman, president of Lido Isle Advisors in Newport Beach, Calif., adding that his next downside target is $82.
Oil prices tallied a loss of 1.4% over the previous two trading sessions. They suffered half of that loss on Wednesday when government data showing gasoline supplies in the U.S. jumped by 7.9 million barrels last week, coupled with disappointing economic data, pressured prices. See: Oil futures fall, settle back below $88.
Oil products also fell Wednesday. Heating oil for January delivery (US:HOF3) fell 5 cents, or 1.6%, to $2.94 a gallon, while gasoline for the same month (US:RBF3) shed 4 cents, or 1.6%, to $2.60 a gallon.
Crude oil extended its losses on “a combination of technical selling and growth concerns after the [European Central Bank] trimmed its GDP forecasts for the euro zone,” said Fawad Razaqzada, technical analyst at GFT markets, in a note.
“The euro moved notably lower and the dollar correspondingly rose when [ECB President] Mario Draghi said the ECB had “wide discussion” on rate cuts but decided not to change it,” he said.
Draghi also said the central bank expects 2012 euro-zone gross domestic product to shrink between 0.6% and 0.4%. See: ECB staff sees weak economic growth through 2014.
The news put pressure on the euro, lifting the dollar in turn, which weighed on dollar-denominated oil prices. The ICE dollar index traded at 80.259, up from 79.774 late Wednesday. See: Dollar gains after Draghi talks rate cuts.
“Investors shrugged off a better-than-expected U.S. jobless claims number,” said Razaqzada. “Ahead of the key [U.S.] nonfarm payrolls day tomorrow, traders are showing little signs of concern for exposing themselves to too upside risks.”
Middle East, OPEC
Among recent developments in the Middle East region, news reports said violence escalated in Egypt after clashes between opponents and supporters of President Mohammed Morsi resulted in several deaths.
Additionally, Israel reportedly moved ahead with plans to build settler homes in the West Bank, prompting the European Union to summon the Israeli ambassador.
“Alongside Egypt, Syria, Gaza and Iran, all remain latent trouble spots, thus justifying a risk premium on the oil price,” analysts at Commerzbank said.
