MW: Oil below $94 on dollar rise, weak demand signals
By Myra P. Saefong and Sara Sjolin, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures fell below $94 a barrel Thursday, pressured by strength in the U.S. dollar, as comments from the European Central Bank’s president about downside risks to the region’s economic recovery raised worries about energy demand.
Crude-oil futures for May delivery CLK3 -1.28% shed 75 cents, or 0.8%, to $93.70 a barrel on the New York Mercantile Exchange.
The contract settled with a $2.74 loss at $94.45 a barrel on Wednesday, hurt by a bigger-than-expected increase in last week’s U.S. crude supplies and a slowdown in private-payrolls growth.
Oil investors on Thursday were tracking monetary-policy decisions from major economies.
“The inaugural speech from Japan’s new finance minister initially buoyed markets overnight,” said Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky.
“Then a more bearish tone was cast by the Bank of England and ECB as they kept interest rates unchanged at low levels, while reaffirming the need for ongoing accommodative monetary policy to keep their respective economies from derailing further,” he said.
Both the European Central Bank and the Bank of England left rates at record lows. At the ECB’s monthly news conference, President Mario Draghi acknowledged that the recovery in the second half of th year is still at risk of being thrown off course.
Wednesday’s petroleum inventory data seemed to be “the straw that broke the camel’s back for this recent rally” in oil, said Smith. Then Thursday’s poor jobless-claims data — hot on the heels of Wednesday’s weak ADP report and ahead of nonfarm payrolls Friday — combined with downbeat comments out of the ECB’s Draghi to send crude spiraling lower,” he said.
Meanwhile, the Bank of Japan pledged to achieve a 2% inflation target in about two years and announced plans to increase government bond purchases at an annual pace of 50 trillion yen ($530 billion).
Bearish momentum should continue in oil prices, “as aggressive policy action by Japan is sending the dollar soaring, which should put downward pressure on crude as our dollar purchasing power improves,” said Phil Flynn, senior market analyst at Price Futures Group.
“Japan is going all in on monetary policy, printing yen without apologies doubling its money supply, trying to shock its economy out of deflation until the whole thing comes crashing down or inflation exceeds 2%,” he said.
The move sent the yen sharply lower, helping lift the ICE dollar index DXY +0.38% to 83.068 from 82.712 seen in late Wednesday in North America.
Elsewhere in the energy complex, gasoline for May delivery RBK3 -0.24% was down half a cent, or 0.2%, at $2.91 a gallon, while heating oil for the same month HOK3 -1.03% was down 2.5 cents, or 0.9%, at $2.98 a gallon.
May natural gas NGK13 +0.36% put on 3 cents, or 0.7%, to $3.93 per million British thermal units.
The U.S. Energy Information Administration will issue its weekly update on natural-gas supplies at 10:30 a.m. Eastern. Analysts polled by Platts forecast a decline of between 90 billion cubic feet and 94 billion for the week ended March 29.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.
