Oil futures: Crude oil down on debt worries, weak China demand

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NEW YORK (Dow Jones)--Crude-oil futures sank Monday as the dollar surged due to Europe's mounting debt crisis, while signs of weakening crude-oil demand emerged from China.

Light, sweet crude oil for August delivery settled down $1.05, or 1.1%, to $95.15 a barrel on the New York Mercantile Exchange. Brent crude oil on the ICE futures exchange recently traded down $1.55, or 1.3%, to $116.78 a barrel.

The dollar rose against the euro as euro-zone officials discussed another bailout for Greece and sought to prevent the crisis from spreading to other countries, such as Italy. Several finance ministers in the single-currency zone said another rescue package for Greece could go forward even in the face of a default.

A stronger dollar often pushes down oil prices as the dollar-denominated commodity becomes more expensive for holders of other currencies. The inverse relationship was particularly strong Monday, with many commodities falling in the face of the resurgent dollar.

"The dollar's been very strong, and it seems to be where the weakness in crude is coming about," said Tony Rosado, broker at GA Global Markets in New York.

The ICE Dollar Index soared to an intraday high of 75.196, its highest since May 25. The measure tracks the dollar against a trade-weighted basket of currencies.

Oil futures were also pressured by data from China showing June oil imports fell to their lowest level in eight months. Imports fell 5.7% from the previous month to 4.81 million barrels a day.

Separately, the Chinese government said the country's consumer price index rose 6.4% in June, the biggest monthly rise since June 2008. The jump has fueled worries that additional monetary tightening--which could damp crude-oil demand in the world's No. 2 oil consumer--is on the horizon.

"Nothing's good on the demand front," said Phil Flynn, oil analyst at brokerage PFG Best in Chicago. "You've got imports to China way down; you've got inflation way up."

Nymex crude-oil futures have fallen for two straight sessions and have stayed below $100 a barrel since June 10. Euro-zone debt worries as well as concerns about weakening crude-oil demand and last month's decision to tap global oil reserves have kept a lid on prices following a run toward $115 a barrel earlier this year.

The International Energy Agency's decision to sell 60 million barrels of reserves is so far being met with buyers. On Monday, the U.S. Department of Energy said 15 companies, from major refiners to banks and trading firms, snapped up all of the 30.64 million barrels of oil being sold by the U.S. government.

Later this week, traders will turn their attention to the DOE's weekly report on commercial oil stocks. That report is due Wednesday at 10:30 a.m. EDT, preceded by a similar survey from the American Petroleum Institute, an industry group, due at 4:30 p.m. Tuesday.

Analysts expect oil inventories last week fell 1.7 million barrels, according to a survey by Dow Jones Newswires. Gasoline inventories were unchanged, according to the analysts' average estimate. Inventories of distillates, including heating oil and diesel, rose 200,000 barrels.

Front-month August reformulated gasoline blendstock, or RBOB, settled down 2.21 cents, or 0.7%, to $3.0705 a gallon. August heating oil settled down 0.89 cent, or 0.3%, to $3.0875 a gallon.



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My Thoughts    
in town  |  July, 11, 2011 at 07:39 PM

Why can't YOU PEOPLE ever speak the truth about why the oil and gasoline prices remain so high when the economy is so far down, as well as the demand for these products?????


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