BLBG: Oil Falls Below $50 as Equities Decline, Dollar Strengthens
Crude oil fell below $50 a barrel as tumbling equity markets indicated that the recession in major energy-consuming countries may deepen, curbing fuel demand.
Oil fell as much as 4.6 percent after the Obama administration said that General Motors Corp. and Chrysler LLC must overhaul recovery plans and some banks may need additional assistance. The dollar strengthened to its highest against the euro in more than a week, limiting the appeal of commodities as an alternative investment.
“The General Motors news was a rather pointed reminder that the economy and oil demand are nowhere near a recovery,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “There was a lot of excitement last week because of rising stock prices, which pushed oil prices too high.”
Crude oil for May delivery fell $2.19, or 4.2 percent, to $50.19 a barrel at 9:41 a.m. on the New York Mercantile Exchange. Futures touched $49.95, the lowest since March 19. Prices are up 13 percent this year.
Prices declined 3.6 percent to $52.38 a barrel on March 27 on signs of a deepening recession in Europe. Oil climbed 0.6 percent last week, the sixth week of gains.
The MSCI World Index lost 2 percent to 824.69 at 9:05 a.m., trimming its biggest monthly gain since 2003.
“The stronger dollar and falling equities are a recipe for lower prices,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “The only question is whether we can close below $50.”
The euro fell against the dollar for a third day on speculation the European Central Bank will cut interest rates to the least since the currency’s introduction in 1999. The dollar strengthened 0.9 percent to $1.3165 per euro from $1.3287.
Slack Demand
Global demand remains slack and oil is unlikely to reach $60 a barrel this year, Qatar’s, oil minister, Abdullah Bin Hamad Al-Attiyah, said. Recent oil price gains were driven by the dollar, not improved supply and demand, Al-Attiyah said in an interview in Kuwait yesterday.
“The international economy is still very weak,” he said. “The crisis has not reached the bottom so we have to be very careful.”
Brent crude oil for May settlement fell $1.87, or 3.6 percent, to $50.11 a barrel on London’s ICE Futures Europe exchange. The contract touched $49.93, the lowest since March 20.
Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended March 24, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 17,637 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 4,130 contracts, or 31 percent, from a week earlier.
