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Monday, March 16, 2015

Big drop for crude

Prices lose 8.5% on a weekly basis 


Crude oil futures fell sharply on Friday, 13 March 2015 at Nymex to tally a weekly decline of nearly 10%, as a monthly report from the International Energy Agency raised concerns that the glut of crude supplies and tightening storage capacity in the U.S. may cause prices to weaken further. 

Crude-oil for delivery in April fell $2.21, or 4.7%, to settle at $44.84 a barrel on the New York Mercantile Exchange. Prices ended the week with a loss of 9.6%. April Brent crude on London's ICE Futures exchange shed $2.41, or 4.2%, to settle at $54.67 a barrel, with the front-month contract down 8.5% for the week. 

The U.S. Energy Department said it plans to buy up to 5 million barrels of crude for the Strategic Petroleum Reserve. Prices in electronic trading edged backed above $45. 

A stronger dollar weighs on dollar-denominated commodities, making them more expensive to users of other currencies. Expectations for a June rate hike by the Fed has helped support the dollar. Looking ahead, the Federal Reserve will hold a two-day meeting beginning on Tuesday. 

Economic data on Friday included PPI and Michigan Sentiment. Producer prices declined 0.5% in February after declining 0.8% in January while the consensus expected an increase of 0.3% The drop in producer prices was a shock. Market expected a rise in energy prices would offset any weaknesses from other sectors, but that did not happen. Energy prices were flat in February after declining 10.3% in January. Food prices declined 1.6% in February after declining 1.1% in January, which was the third consecutive monthly decline in food prices. Most of the drop resulted from a 17.1% decline in fresh and dry vegetable prices. 

Excluding food and energy, core PPI also declined 0.5% in February after declining 0.1% in January while the consensus expected an increase of 0.1%. 

The University of Michigan Consumer Sentiment Index dropped to 91.2 in the preliminary March reading from 95.4 while the consensus expected an increase to 95.8. Slightly higher gasoline prices and a volatile equity market offset continued strengthening in the labor market. 

Among other energy porducts, Nymex gasoline for April delivery fell 4.7 cents, or 2.6%, to $1.762 a gallon, poised for a loss of more than 6% for the week. April heating oil fell 6.6 cents, or 3.7%, to $1.713 a gallon, down over 8% for the week. 

April natural gas fell less than a cent to $2.727 per million British thermal units. It saw a weekly decline of nearly 4%.
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