02/01/2010
Market’s reaction to economic growth runs counter to conventional wisdom, but that’s the market for you.
LONDON – Crude oil futures dropped under $73 a barrel on Friday despite positive U.S. economic data, Reuters reports.
The U.S. economy grew 5.7 percent during the fourth quarter, the fastest pace in more than six years. The growth was attributed to businesses reducing inventories less forcefully, according to the U.S. Department of Commerce. Estimates for fourth-quarter GDP growth places it at its fastest pace since the third quarter of 2003.
While positive economic news typically sends speculators bidding up oil process, oil prices declined for their third straight week. Oil futures prices for March delivery settled at $72.89 a barrel in trading on Friday. Oil prices are now down more than 10 percent from the 15-month high of barely under $84 on January 11.
Demand was considered the reason for oil’s continuing slide. U.S. demand for oil dropped 2 percent over the last four weeks from the year before, And Japanese data portrayed crude oil imports as declining 2.6 percent in December and gasoline sales falling 2.4 percent.
“Oil is pausing for breath after quite a big fall over the last few weeks,” said Eugen Weinberg, a commodities analyst at Commerzbank. “But the mood has changed with traders now looking for reasons to sell instead of reasons to buy. Current prices do not reflect the fundamentals of demand and supply and could go a lot lower, although I think we will see some stabilization before the next move downwards.”
Royal Dutch Shell’s CEO said that oil would not revert to its 2008 peak level of more than $140 per barrel, but would instead trade between $60 and $80.