Wednesday, May 19, 2010

Crude Oil Futures Drop Below $68 on Tuesday Evenings Globex Session

Crude oil futures fell below $68 a barrel in electronic trading Wednesday afternoon in Asia, extending their losses after closing at a seven month low in New York, as broad weakness in Asia's stock markets helped rob investors of confidence in energy demand. "The European fiscal crisis and the generalization of budget adjustment programs seem to have acted as an eye-opener," Christophe Barret, global oil analyst at Credit Agricole, said in a report this week, pointing out that since the start of April, West Texas Intermediate crude had lost $15 a barrel.

New fears over spread of Gulf oil spill
There are new new fears that the massive Gulf of Mexico oil spill is spreading through ocean currents, after tarballs were found on Florida's Key West. "This evolution is more or less in line with what would have been dictated by still weak fundamentals, and appears as a healthy correction to inflated prices," he said. Crude oil for June delivery was down 80 cents, or 1.2%, at $68.61 per barrel on Globex in Asia's afternoon trading. It touched an intraday low of $67.90.

The contract lost 67 cents, or 1%, to $69.41 a barrel on the New York Mercantile Exchange Tuesday, ending in the red for the sixth consecutive session. That was the lowest settlement for a most active contract since Sept. 29, when oil ended at $66.71 a barrel, according to FactSet Research. See Tuesday's Futures Movers column. "Germany's ban on 'naked short selling' caused a spike in the [U.S.] dollar, and WTI ultimately closed below $70," Stephen Schork, editor of The Schork Report, said in his latest report. Traders are also looking ahead to weekly data on petroleum supplies due from the Energy Department's Energy Information Administration at 10:30 a.m. Wednesday in Washington.

Analysts polled by Platts expect a rise of 950,000 barrels in crude supplies. The market will be looking specifically at inventories at the Cushing hub, said Schork. Oil futures have been under pressure because of rising inventories at Cushing, Okla., the delivery point for futures traded on the New York Mercantile Exchange. Overall, analysts at Credit Suisse said they "remain cautious on the near term prospects of crude oil, but think that medium term fundamentals remain supportive."

Reporter Myra P. Saefong is MarketWatch's assistant global markets editor in Tokyo.

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