Oil falls to near $88 a barrel in Europe
Monday, January 24, 2011
Oil prices fell to near $88 a barrel Monday due to the effects of a stronger dollar, weaker stock markets and expectations China will take more measures to cool its economy.
By early afternoon in Europe, benchmark crude for March delivery was down 77 cents at $88.34 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 48 cents to settle at $89.11 on Friday.
Oil has fallen from above $93 a barrel after economic indicators from China last week showed its economic growth accelerated in the fourth quarter and inflation remained elevated.
That has investors worried Beijing will take more steps to slow growth, reducing demand for crude from the world’s biggest energy consumer.
Analysts warned that persistently high crude prices could begin limiting appetite for oil.
“There is once again a risk that these commodity price gains will sow the seeds of their own destruction,” said a report from KBC Energy Economics in London. “With the economic recovery still fragile, an oil price rally on the scale of 2008 seems unlikely but at close to $100 a barrel, we are at levels where consumer resistance should begin to be felt.”
Also tempering oil futures were mostly lowers stock markets in Asia and Europe, as well as a stronger dollar, which makes crude less attractive to investors holding other currencies.
The euro fell to $1.3560 on Monday from $1.3602 late Friday, while the British pound was down to $1.5943 from $1.6002.
Prices were supported by comments from Saudi Arabia’s oil minister, who said he expects global oil demand to rise by between 1.5 million and 1.8 million barrels a day in 2011.
Ali Naimi’s forecast was higher than OPEC’s estimate released last week, which saw a global demand rise of 1.2 million barrels this year.
In other Nymex trading in February contracts, heating oil rose 1.02 cent to $2.661 a gallon and gasoline lost 0.02 cent to $2.4585 a gallon. Natural gas gained 5.3 cents to $4.789 per 1,000 cubic feet.
In London, Brent crude was up 21 cents at $97.81 a barrel on the ICE futures exchange.