By Victor Reklaitis and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) — Oil prices dropped Friday and were on pace for a weekly loss of more than 2%, as the market assesses demand prospects after the Federal Reserve said the world’s largest economy isn’t yet strong enough to withstand the withdrawal of monetary stimulus.
October crude oil CLV3 -0.29% fell 83 cents, or 0.8%, to $105.56 a barrel. The contract was due to expire at the close of trade on the New York Mercantile Exchange later Friday.
The November crude contract CLX3 -0.15% fell 53 cents, or 0.5% to $105.33 a barrel.
October crude on Thursday dropped $1.68, or 1.6%, on the New York Mercantile Exchange, giving back a chunk of Wednesday’s 2.5% climb following the Fed’s generally unexpected decision to keep the pace of monthly bond purchase at $85 billion. Wednesday’s rally also came after a bigger-than-expected drop in U.S. crude stockpiles.
On Thursday, “the market was weak as somehow, someway the Street sobered up and (maybe) realized that buying energy on the moronic notion that the Fed’s diminished prospect of economic growth is worthy of owning $110 crude oil is, well, moronic,” wrote Stephen Schork, editor of the Schork Report on Friday.
The Fed reduced its 2013 growth forecast for a third time this year and said government spending cuts and rising mortgage rates are “restraining economic growth” in key sectors such as housing.
Analysts at Commerzbank Commodity Research also said crude’s recent retreat makes sense.
“After all, the ultra-expansionary monetary policy pursued by the US Federal Reserve does nothing to eliminate the supply surplus on the oil market,” they wrote in a research note on Friday.
“The supply risks, on the other hand, appear to be further abating. Oil production in Libya, for example, has risen to a good 620,000 barrels per day now that production has resumed at oil fields in the west of the country. “
November Brent crude UK:LCOX3 +0.64% rose 28 cents, or 0.3%, to $109.04 a barrel.
October natural gas NGV13 -1.59% fell 2 cents, or 0.6%, to $3.70 per million British thermal units.
Elsewhere in the energy complex, October gasoline RBV3 +0.14% rose less than 1 cent to $2.70 a gallon
October heating oil was up 1 cent to $3.01 a gallon.
Victor Reklaitis is a New York-based markets writer for MarketWatch. Follow him on Twitter @VicRek.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer. Carla Mozee contributed to this report.
