Market Close: Oct 09 Down
Oct 9th, 2014 by loren
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On the New York Mercantile Exchange, light, sweet crude futures for delivery in November dropped $1.54, or 1.8%, to close at $85.77 a barrel, the lowest finish since December 2012. December Brent crude on London’s ICE Futures exchange temporarily dropped below the psychologically important threshold of $90 a barrel before finishing at $90.05, a loss of $1.33 and the lowest close since June 2012. Oil extended its decline as U.S. stocks came under heavy selling pressure, which pushed the Dow industrials down by more than 300 points and saw the S&P 500 tumble by more than 2%.Concerns about global growth continue to overhang financial markets and weighed on crude in particular.
The minutes of the latest Federal Reserve policy meeting released Wednesday showed officials were concerned the strengthening U.S. dollar could weigh on the U.S. economy. That sent the dollar lower but failed to provide lasting respite to oil, which had suffered in recent weeks as the currency gained ground. A stronger dollar can be a negative for dollar-priced commodities because it makes them more expensive to users of other currencies. “The minutes pushed back interest increase expectations and sent stocks and the euro soaring and dollar back down. Yet even with a break in the dollar, oil falls as demand fears grow,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Oil bulls were also cowed by a larger-than-expected build of 5 million barrels in weekly U.S. stockpiles in the week ended Oct. 3, according to the U.S. Energy Information Administration data released Wednesday. The market had expected a rise of just 1.9 million barrels. Brent prices have fallen for seven of the past eight trading sessions and bulls are hoping that a November meeting of the Organization of the Petroleum Exporting Countries will balance out excess supplies in the market. On a most-active basis, Brent’s Wednesday decline took it down more than 20% from its June high of $115.06 a barrel, meeting the widely-used definition of a bear market. “Although the return of significant Libyan production has been an important factor putting downward pressure on the Brent price, weakening global demand, particularly in Europe and Asia, is also important,” the U.S. EIA said in its latest report. “Near-term seasonal market conditions are also reducing crude demand, as substantial refinery maintenance in the U.S., Europe, and Asia takes place in September and October, reducing demand for crude,” it said.