Crude Oil Prices Take a Dive After a Week of Gains
Oil Market Summary for 02/08/2010 - 02/12/2010
Crude oil prices took a dive on Friday after a week of gains
from
U.S. blizzards were
undercut by another move in
China
to tighten monetary policy.
China’s
central bank raised reserve requirements for its banks for the second time this
year as it tries to curb lending and avoid asset bubbles from forming in an
overheated economy.
China is
the world’s second-largest importer of oil, after the
U.S.,
and one of the world’s fastest-growing economies, so energy markets are very
sensitive to any change in conditions there.
Blizzard conditions in the U.S. Northeast had propelled West
Texas Intermediate prices back up above $75 earlier in the week. But a decline
of some 1.5% on Friday pushed prices down near $74 a barrel again. Still, oil
was ahead about 4% on the week.
A revised forecast from the International Energy Agency
raised expected demand for crude this year by 120,000 barrels a day to 1.6
million. However, the IEA said the increase was due to growth in emerging
economies, with demand remaining flat in industrial countries, despite the
unusually severe winter. The new moves in
China
raise question marks about that anticipated increase in demand.
U.S. data
on inventories, which came out late due to snow-related government closures in
Washington,
showed gasoline inventories rising by 2.3 million barrels, about 1%, much more
than expected. But analysts said that may be due to the simple fact that people
aren’t able to drive in snowbound cities. Distillate inventories, including
heating oil, fell less than expected despite the inclement weather.
A pledge by European Union leaders that they would do what
it takes to keep
Greece
from sliding into default briefly took some of the pressure off the euro, but
markets remained concerned at the lack of detail about any rescue plan. A
weakening euro means a stronger dollar, which puts downward pressure on energy
futures. The crisis in southern
Europe
threatens economic recovery in the EU and further dampens optimism for energy
demand.
Bloomberg reported that Gary Gensler, chairman of the
Commodity Futures Trading Commission, is proving to be a formidable adversary
for hedge funds and other participants in derivatives trading as he pushes for
reform, including restrictions in energy futures trading. Despite, or perhaps
because of, his 18 years at Goldman Sachs, Gensler is insisting on position
limits for energy trades and trying to close any loopholes that would let funds
slip through on end-user exemptions, Bloomberg said.
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Darrell Delamaide writes for OilPrice.com and focuses on Fossil
Fuels, Alternative Energy, Metals, Crude Oil Price and Geopolitics. To find out
more visit their website at: http://www.oilprice.com
