TH: Oil falls below $74 as global stock markets slump
Oil prices fell below $74 a barrel Tuesday, extending losses from the previous session, as the dollar strengthened and global stock markets slumped after a disappointing U.S. consumer spending number.
By early afternoon in Europe, benchmark crude for October delivery was down $1.05 to $73.65 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 47 cents to settle at $74.70 on Monday.
Oil traders have been following closely global stock markets as a barometer of overall investor sentiment. The Dow Jones industrial average dropped 1.4 percent Monday after the Commerce Department said consumer spending in the U.S. rose just 0.4 percent in July.
Most major Asian and European stock markets also fell Tuesday, led by a 3.6 percent plunge in Japan's Nikkei 225 index.
"Oil continues to spend much of its time trailing the stock market," analysts at Ritterbusch and Associates said in a report. "Bearish underlying fundamentals make it extremely easy for oil to drift lower in response to weakening equities."
Investors will be looking to August employment data on Friday for clues about the strength of the U.S. economy.
The market will also keep an eye on U.S. crude stocks figures to be released later Tuesday by the American Petroleum Institute and by the U.S. Energy Information Administration on Wednesday.
Crude oil stocks are expected to have risen by 1.9 million barrels, while gasoline stocks are seen to have fallen by 1 million barrels, according to a survey of analysts by Platts, the energy information arm of McGraw–Hill Cos.
"Weak demand from the world's largest oil consumer is clearly reflected in rising crude and oil product inventories, which are now at their highest level since the early 1980s," said a report from Commerzbank in Frankfurt.
A firmer dollar also weighed on oil prices, making crude more expensive to investors holding other currencies.
The euro fell to $1.2635 Tuesday from $1.2671 late Monday in New York, while the British pound dropped to $1.5385 from $1.5468 on Monday.
In other Nymex trading in September contracts, heating oil fell 1.47 cents to $2.0105 a gallon and gasoline slid 1.93 cents to $1.9148 a gallon. Natural gas for October delivery rose 3.4 cents to $3.846 per 1,000 cubic feet.
In London, Brent crude was down 73 cents at $74.65 a barrel on the ICE Futures exchange.
