Business | Oil & Gas

Oil falls hard amid concern of sluggish US economy

US crude also drops as traders sold positions ahead of holiday weekend

  • Reuters
  • Published: 15:33 February 16, 2013
  • Gulf News

New York: Oil prices sank on Friday and Brent futures finished their first negative week since mid-January after an unexpected dip in US industrial production spurred concerns about lagging economic activity.

Industrial production dipped 0.1 per cent last month after a revised 0.4 per cent gain in December. Economists had been expecting a modest increase in industrial output in January.

US crude prices also fell hard as traders sold positions ahead of the US holiday weekend.

“We gave [US] oil many chances to get above $98 (Dh360) and test $100 a barrel. And it becomes a situation where we can’t rally, so we sell it,” said Richard Ilczyszyn, chief market strategist at iitrader.com LLC in Chicago.

Brent futures for April delivery tumbled to a low of $116.28 per barrel, down $1.72, before recovering to settle off 34 cents at $117.66. The contract ended the week down $1.24 or 1 per cent, its first loss since the week ending January 13.

US crude shed $1.45 to settle at $95.86 per barrel. For the week, US crude managed a small gain of 14 cent a barrel.

Wednesday saw a record in open interest for West Texas Intermediate futures, as CME Group Inc said on Thursday it had reached 1,665,014 contracts.

Broader commodities markets were hit hard on Friday, as gold fell to a six-month low, with a slate of economic figures suggesting the world economy would not expand as rapidly as anticipated.

“All commodities are selling off hard,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt. “This data is worse than most economists had been expecting.”

Not all US economic signs were negative on Friday. US consumer sentiment improved in February, buoyed by signs of increased hiring, though worries heightened about a decline in future income, a Thomson Reuters/University of Michigan survey showed.

But global growth prospects were clouded by expected divisions at a meeting in Moscow of finance officials from the Group of 20 nations, 90 per cent of the world’s economy, over economic policy and its impact on currencies.

Economists are worried that competitive devaluations could lead to currency wars, impoverishing nations worldwide.

Iran

A floor under oil prices was maintained with supply concerns stemming from worries over Iran’s nuclear programme. Talks between Iran and the United Nations appear to have failed as inspectors returned from talks in Tehran with no deal on reviving a nuclear investigation and no date for a new meeting.

Reuters also reported on Friday that major powers plan to offer to ease sanctions barring trade in gold and other precious metals with Iran in return for Iranian steps to shut down a newly expanded uranium enrichment plan, Western officials said.

Concerns that the conflict could curb oil supply had eased slightly after the Middle Eastern nation appeared to be taking steps to slow the growth of stockpiles of nuclear materials that could be used to make a bomb.

A collision involving two barges late on Thursday resulted in a small oil spill of four to eight barrels near Baton Rouge, Louisiana on the Mississippi River, the United States Coast Guard said. Vessel traffic was unaffected.

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