BizAims

Crude oil futures continued to slide Tuesday due to concerns over the economic recovery and continued milder temperatures. 

Light, sweet crude for February delivery recently traded 61 cents, or 0.8%, lower at $77.39 a barrel on the New York Mercantile Exchange. Prices had dipped to an intraday low of $76.76 a barrel, the lowest level since Dec. 24. The February WTI contract is due to expire Wednesday.

Brent crude on the ICE futures exchange traded $1.02, or 1.3%, lower at $76.08 a barrel. 

Waning optimism over the pace of the economic recovery is leading investors to move out of riskier assets such as oil.

Some have shifted into the dollar, typically a safer, but low-yielding, asset, causing the dollar to strengthen.

This is weighing on oil prices with oil tending to fall as the greenback rises, as this makes the dollar-denominated commodity more expensive to purchase by other currency holders.

Unease over the economy remains as unemployment in the U.S. is still at record high levels while consumers are still reluctant to spend, as evidenced by the lower retail sales reported in the U.S. last week for December.

This helped deflate oil prices alongside signals that China intends to tighten its monetary policy, which could slow its economic growth and demand for commodities.

"With concerns about the economy and the [U.S. corporate] earnings season, some of the economic optimism appears to have faded," said Gene McGillian, analyst with Tradition Energy in Stamford, Conn.

McGillian notes that oil market participants are also looking at the fundamental picture and seeing persistently weak U.S. oil demand as a reason for oil prices to fall.

The retreat in oil prices from to an intraday and 15-month high of $83.95 a barrel on Jan. 11 has also been due to the evaporation of the frigid conditions that afflicted much of the northern hemisphere in early January and the emergence of milder temperatures.

"We are viewing these fresh recent lows as a portent of lower oil values as this week proceeds, given bearish domestic oil balances that are becoming increasingly burdensome as the weather patterns have shifted," Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, in Galena, Ill., said in a note.

The Organization of Petroleum Exporting Countries said Tuesday that oil prices remain vulnerable to seasonal demand weakness, reinforcing expectations that the group will keep output steady when it meets in March.

"The persisting stock overhang, low seasonal demand and the start of refining maintenance point to the need for continued caution over the coming months as volatility is expected to remain," said the cartel in its January report.

Traders will be looking ahead to this week's U.S. inventory data to see if stocks will post any declines and change the pattern of heavy builds seen in reports so far this year.

"If we see another build, we could see further pressure on the market," said McGillian.

The data from the American Petroleum Institute will be released a day later on Wednesday due to Monday's Martin Luther King Jr. holiday while the U.S. Energy Information Administration will issue its report Thursday.

Front-month February reformulated gasoline blendstock, or RBOB, recently traded 2.01 cents. or 1%, lower at $2.0253 a gallon. February heating oil recently traded 2.95 cents, or 1.4%, lower at $2.0165 a gallon.---Source: wsj.com