MW:Oil beats hasty retreat after cliff vote canceled
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — U.S. oil futures struggled to stay above the $89-a-barrel level during Asian trading hours Friday, retreating sharply as fears about the fiscal cliff slammed investor risk appetite after House Republicans abruptly canceled a vote on a tax-cut bill.
February futures for benchmark U.S. crude oil CLG3 -1.04% dropped $1.09, or 1.2%, to $89.04 a barrel in electronic trading, well off the day’s highs.
The front-month contract had settled 15 cents higher in Thursday’s regular New York Mercantile Exchange session, and were trading above $90 earlier in the day.
But they dropped sharply after the U.S. House Republicans canceled a planned vote on a bill linked to the fiscal-cliff talks, saying there wasn’t sufficient support for the measure. The failed vote, which cast a shadow over odds for a bipartisal deal, briefly sent crude futures as low as $88.93 a barrel. Read: House Republicans cancel Paln B tax vote.
“With time running out, we see a rising chance that negotiations will continue on into January, with an eventual fix made retroactive to the start of the year,” said Tim Evans, an analyst at Citi Futures.
Oil futures, however, were still on course for gains of more than 2.6% this week.
A sharp fall in U.S. equity futures reflected market concerns over the latest developments, with Dow Jones Industrial Average DJIA +0.45% futures losing nearly 200 points, or 1.5%, to 13,068.
Asian markets, some of which were trading sharply higher earlier in the day, also staged a retreat, with Japan’s Nikkei Stock Average JP:100000018 -0.85% trading 0.6% lower in the afternoon after rising more than 1% earlier in the day. Read more in Asia Markets.
Meanwhile, the ICE dollar index DXY +0.19% , which measures the greenback’s performance against a basket of six other major currencies, rose to 79.377, up from 79.239 in North America late Thursday.
Other products in the energy complex were also dragged lower on cliff worries, with January futures for gasoline RBF3 -0.14% slipping by 0.4% to $2.74 a gallon, January heating oil HOF3 -0.31% losing 0.4% to $3.05 a gallon, and January natural gas NGF13 -0.69% down 0.3% to $3.45 per million British thermal units.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.
