MW: Oil drops below $96 as traders weigh demand cues
By Myra P. Saefong and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures dropped on Friday, pressured by strength in the dollar as traders reviewed the week’s economic data for hints on the outlook for energy demand.
Oil for March delivery CLH3 -1.75% sank $1.78, or 1.8%, to $95.53 a barrel on the New York Mercantile Exchange. Prices were trading around 0.2% lower for the week.
The oil market is seeing “an enhanced-Friday sell off, as traders look to cash-in ahead of the weekend,” said Matthew Parry, a senior oil-market analyst at the Paris-based International Energy Agency. Some traders “have been spooked by the weak macroeconomic news feed that was seen in Europe and Japan.”
On Thursday, data showed that Japan’s economy contracted for the third quarter, with gross domestic product shrinking 0.1%, or a drop of 0.4% on an annualized basis, while euro-zone GDP contracted by 0.6% in the final three months of 2012. See: Euro-zone GDP plunges stokes rate-cut expectations.
“Europe’s really suffering from this whole kicking-the-can down the road thing, and until the debt overhang is sorted out, economic momentum will remain blighted,” said Parry, in emailed comments. “It could be a reflection for the lost-decade that Japan saw — is still seeing.”
U.S. data Friday showed that industrial production slipped 0.1% in January. See: Industrial production slips in January.
But manufacturing activity in the New York region expanded in February for the first time in seven months and consumer sentiment rose in February, according to a preliminary reading, to the highest level since November. See: Manufacturing improves in New York and consumer sentiment highest in three months.
A rise in the dollar against other major currencies weighed on oil prices, as well as other dollar-denominated commodity prices such as gold, because it made them more expensive for holders of other currencies.
The dollar index DXY +0.17% , which tracks the greenback’s performance, climbed to 80.522 from 80.336 in late North American trading Thursday. The index was set for a 0.3% gain on the week, already up 1.7% month to date.
Among the energy products, gasoline was a standout, with the March contract RBH3 +0.02% climbing by as much as 1.2% to tap a high of $3.16 a gallon before pulling back to trade up 1.5 cents, or 0.5%, at $3.13 a gallon. For the week, prices were up more than 2%.
March heating oil HOH3 -1.11% traded at $3.19 a gallon, down 3 cents, or 1%, trading around 1.5% lower than a week ago.
March natural gas NGH13 +0.51% was up nearly 2 cents, or 0.5%, at $3.18 per million British thermal units, trading down 2.8% for the week.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Polya Lesova is MarketWatch's New York deputy bureau chief. Follow her on Twitter @PolyaLesova.
