Crude-oil futures fell Monday as investors fretted about the potential for diminished demand for oil after debt-ratings company Standard & Poor’s cut its outlook on the U.S. government’s credit rating and sparked a rush from stocks and growth-leveraged commodities.
Benchmark light, sweet crude for May delivery CLK11 +0.09% fell $2.54, or 2.3%, to $107.12 a barrel on the New York Mercantile Exchange. It snapped a three-day winning streak for oil.
Gasoline, natural gas, copper, corn and soybeans were all lower, with a stronger dollar also providing some headwinds.
“This was not a downgrade, but got some people concerned,” said Kyle Cooper, managing director of IAF Advisors in Houston. “The possibility of a U.S. debt downgrade raises the fear of a slower economy and less oil consumption.”
The Dow Jones Industrial AverageDJIA -1.14% recently fell more than 150 points, or 1.3%, to 12,189, recovering some ground.
Gold added to gains with the June gold contract GCM11 +0.08% settling at a record $1,492.90 an ounce. Read more about gold
Before the start of U.S. trading, Standard & Poor’s said it slashed its outlook on the U.S. to negative from stable, though it kept its triple-A rating on the world’s largest economy.
“More than two years after the beginning of the recent crisis, U.S. policy makers have still not agreed on how to reverse recent fiscal deterioration,” Standard & Poor’s said. Read more about S&P’s ratings cut.
The dollar index DXY -0.04% , which measures the greenback against a basket of six currencies, rose to 75.491 from 74.867 in late North American trading Friday.
Ahead of the report, oil had traded lower but above $108 a barrel as investors worried about softer demand due to the recent prices increases.
Earlier Monday, Saudi Arabia announced it had cut output for March due to the weaker demand, according to news reports.
Saudi Arabia’s output reached 8.292 million barrels a day, down from 9.125 million in February. Some major oil-consuming nations had hoped Saudi output could help send oil prices lower.
Saudi Oil Minister Ali al-Naimi said that April production was expected to rise slightly from March levels, according to the reports.
Big oil technology aims to stop spills
A new device called a “capping stack,” unveiled by a consortium of oil companies, aims to allow emergency responders to plug deepwater oil spills similar to the one in the Gulf of Mexico last year.
The reports came as geopolitical tensions and violent attacks continued across the Middle East and North Africa over the weekend, stoking uncertainty in oil markets. Read more about Middle East and North African unrest.
“The market remains far from any equilibrium, supply losses have not been made good, geopolitical risk remains elevated, spare capacity is still falling, and the very limited movement along the demand curve in response to higher prices has thus far been an order of magnitude less than the supply-side outages,” analysts at Barclays Capital said in a research note.
Major oil exporter Nigeria, however, took a turn for the worse after Sunday’s presidential vote was described as largely peaceful. Riots and gunfire were reported in the country’s Muslim north.
Media reports said incumbent Goodluck Jonathan, a Christian, was likely to the winner.See report on concerns surrounding Nigerian election.
Other fuels also traded lower on Monday, with gasoline for May delivery RBK11 +0.17% down 4 cents, or 1.1%, to $3.25 a gallon.
May heating oil HOK11 +0.02% retreated 4 cents, or 1.3%, to $3.18 a gallon.
May natural gas NGK11 +0.05% retreated 7 cents, or 1.6%, to $4.14 per million British thermal units.
Natural gas is “relatively cheap as we currently have near average storage and below-average prices, but without any particular near-term pressure to lift prices we see potential for ongoing choppy trade within the recent rage,” said Tim Evans, an analyst with Citigroup’s Citi Futures Perspective, in a note to clients.
Posts
0 comments