OIL FUTURES: Crude Falls As Economy Fears Grow
Fri Oct 31 09:02:08 2008
EDT
LONDON (Dow Jones)--Crude oil futures fell more than $3 in European trade
Friday on mounting concerns that global economic growth is slowing and will
toll on demand for crude oil.
A 0.3% drop in third quarter U.S. gross domestic product announced Thursday
prompted traders to exit crude positions and a Bank of Japan interest rate cut
Friday failed to brighten sentiment; the 20 basis point trim was slightly
smaller than the 25 basis points expected.
Signs of further slowing emerged in Europe meanwhile, with the Eurozone's
largest economy Germany reporting a larger-than-expected drop in retail sales
in September.
"It appears that the falling demand scenario is coming back into play on the
back of poor global economic data," said Rob Laughlin, energy analyst at MF
Global in London.
Meanwhile European equity markets channeled further bearishness into the oil
markets, with a spate of profit warnings reminding investors the earnings
outlook remains poor.
At 1242 GMT, the front-month December Brent contract on London's ICE futures
exchange was down $2.11 at $61.60 a barrel, having earlier fallen more than $3
to $60.62 a barrel.
The front-month December light, sweet, crude contract on the New York
Mercantile Exchange was trading $1.98 lower at $63.98 a barrel.
The ICE's gasoil contract for November delivery was down $1.50 at $630.25 a
metric ton, while Nymex gasoline for November delivery was down 404 points at
142.66 cents a gallon.
While interest rate cuts are expected from the European Central Bank and the
Bank of England next week, market participants expect the economic impact of
such cuts are unlikely to be felt instantly.
"A rate cut today doesn't mean an increase in oil demand today or tomorrow -
it may not come until next year," said Christopher Bellew, energy broker at
Bache Commodities in London.
The U.S. Energy Information Administration Thursday underscored how slowing
economic conditions are curbing crude demand, revising U.S. August oil demand
down 975,000 barrels a day from earlier data. Data from the Japanese government
painted a similar picture Friday, the Ministry of Economy, Trade and Industry
reporting Japan's domestic oil demand slumped further in September with an
11.9% fall in sales volume.
A stronger U.S. dollar meanwhile added to pressure on crude prices Friday,
with the greenback trading higher against most major currencies, reversing some
of its recent falls.
(END) Dow Jones Newswires
