Oil falls below $35 ahead of busy earnings week
- From: rst0wxyz <rst0wxyz@xxxxxxxxx>
- Date: Mon, 19 Jan 2009 12:04:05 -0800 (PST)
Oil falls below $35 ahead of busy earnings week
By Pablo Gorondi
http://www.mercurynews.com/breakingnews/ci_11490364?nclick_check=1
Associated Press
Posted: 01/19/2009 08:19:03 AM PST
Oil prices fell to below $35 a barrel today as investors eyed a slew
of U.S. corporate earnings this week for signs of weakening consumer
demand amid the worst recession in decades.
Light, sweet crude for February delivery was down $1.88 to $34.63 a
barrel by mid-afternoon in Europe in electronic trading on the New
York Mercantile Exchange.
The contract, which expires on Tuesday, rose $1.11 on Friday to settle
at $36.51. The March contract was trading at $40.90 a barrel, down
$1.67.
In London, the March Brent crude contract fell $1.87 to $44.70 a
barrel on the ICE Futures exchange.
The large spread between the Nymex and Brent contracts was attributed
in part to the "brimming stock situation" in Cushing, Oklahoma, the
delivery point for the Nymex contract, said analysts at JBC Energy in
Vienna.
The oil market is closed in the U.S. today for Martin Luther King Jr.
Day and on Tuesday the attention of some investors will be diverted to
Washington with the inauguration of President-elect Barack Obama.
Other geopolitical factors also were seen as bearish for prices.
"The easing of the conflict in Israel-Gaza and the promise of a signed
resolution (Monday) of the Russian-Ukraine gas supply dispute may
weigh on price sentiment already subdued by the weight of lower demand
forecasts," said a report from Sucden Financial Research in London.
Investors expect to glean more insight into the extent of the current
downturn when hundreds of companies report fourth quarter results this
week, including heavyweights Google, US Bancorp, General Electric,
Microsoft and Johnson & Johnson.
Investors are bracing for bad numbers after banking giant Citigroup on
Friday said it lost $8.29 billion in the fourth quarter and that it
was splitting in two to help restore profits.
Concern that a recession in developed countries may be worse than
previously expected — and that it's eating away at demand for oil —
has sent crude prices down about 30 percent from $50.47 a barrel
earlier this month and down about 75 percent from $147.27 in July.
"In the short-term, demand is collapsing and the price is going to
fall," said Richard Urwin, who helps manage more than $10 billion of
stocks, bonds and other investments, including Asian assets, for
BlackRock in London. "The risks for the moment are on the downside."
The Organization of Petroleum Exporting Countries has announced
production cuts of 4.2 million barrels a day since September, and the
group's members are showing signs of implementing the output
reductions.
But many investors are worried the cuts won't be enough as demand from
around the world evaporates.
"The OPEC output cuts aren't going to offset demand weakness," Urwin
said.
The fall in demand means oil producers have more spare capacity than
six months ago, so in the event demand rises on the back of an
economic recovery, producers will be able to easily meet that demand,
which would slow any jump in prices.
"Even if we see an economic recovery later in the year, I don't think
oil is going to rebound very quickly because the degree of excess
capacity is quite big," Urwin said.
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