Oil prices continued to drop after Wednesday’s 5 per cent plunge, as Europe’s weakest economies failed to get more help from their central bank. Benchmark crude on yesterday fell 58 cents to US$94.37 per barrel in afternoon trading in New York. Similar concerns weighed on oil markets Wednesday, pushing the benchmark price to the lowest level since November 7.
Brent crude, which is used to price foreign oil that’s imported by many US refineries, lost 22 cents at US$104.03 a barrel in London. Investors had hoped that the European Central Bank would take a bigger role in aiding heavily indebted countries like Greece, Italy and Spain. But the ECB has given no indication that it will do so. Without more support those countries won’t be able to pay their bills without even greater spending cuts, analysts said. That will further reduce energy demand and slow imports of manufactured goods from the US, China and elsewhere.
Many traders thought the European financial crisis would be resolved by now. With the situation still in flux, they have decided to close out their positions and lock in whatever profits they’ve made before the end of the fiscal year, PFGBest analyst Phil Flynn said. “The market has come to the reality that the European situation won’t be tidied up before the end of the year,” Flynn said.
Oil prices fell despite a brighter outlook for the US economy and rising stock prices. The government said that applications for unemployment benefits fell last week to the lowest level since May 2008. While manufacturing output fell last month after six straight months of steady gains, a regional report yesterday showed manufacturing activity is rising this month in the Philadelphia area. The Energy Department said natural gas supplies dropped by 102 billion cubic feet last week. That was more than analysts expected. The country is still loaded with a surplus of gas, however, and storage levels are more than 10 per cent above the five-year average.
In other energy trading, heating oil rose 1 cent to US$2.8397 per gallon, and gasoline futures rose by less than a penny to US$2.5079 a gallon. Natural gas was flat at US$3.142 per 1,000 cubic feet. (AP)
