MW; Crude falls 3% as traders watch dollar, rescue plan
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Crude-oil futures fell nearly 3% Thursday, weighed down by gains in the U.S. dollar and worries about a slowdown in oil demand.
Traders are also closely watching the $700 billion rescue plan for the financial industry. The plan was approved by the U.S. Senate last night and the House of Representatives may now consider it on Friday. Read more.
Crude oil for November delivery dropped $2.65 to $95.88 a barrel in electronic trading on Globex.
Passage of the rescue plan by Congress "could potentially boost equities and support commodity markets in the short term," said Andrey Kryuchenkov, an analyst at Sucden Research, in a note.
However, "fears of slowing growth and low credit liquidity are at the forefront of investors' agenda," he said. "Growth fears are likely to cap gains in oil prices in the near future and persist until we start seeing a pick up in winter demand, with some improving economic data from the developed world."
Meanwhile, Merrill Lynch cut its 2009 oil price forecast to $90 a barrel from $107 a barrel and warned that a "synchronous global recession" could bring oil prices to $50 a barrel. It said U.S. oil demand is far outpacing its decline expectations, European demand is falling rapidly, and some of the emerging markets aren't keeping up either.
Plus, a string of fields in Saudi Arabia, Qatar and others will bring about 3 million barrels of oil a day in incremental capacity over the next 12 months.
In the currency markets, the U.S. dollar rose against most other major currencies, with the dollar index gaining 1.4% to 80.73.
The euro fell 0.8% against the dollar after the European Central Bank left its key interest rate unchanged at 4.25% on Thursday. See Currencies.
Dollar strength typically weighs on dollar-denominated commodities such as oil and gold.
On Wednesday, crude fell $1.78, or 1.8%, to $98.89 a barrel on the New York Mercantile Exchange.
The U.S. Energy Department reported that crude supplies rose for the first time in six weeks, by 4.3 million barrels to 294.5 million barrels for the week ended Sept. 26.
Also on the Globex Thursday, November reformulated gasoline fell 6 cents to $2.30 a gallon and November heating oil dropped 6 cents to $2.79 a gallon.
November natural gas futures fell 1 cent to $7.71 per million British thermal units.
The Energy Department will release Thursday its weekly update on natural-gas supplies in storage.
Analysts at Strategic Energy & Economic Research expect to see an increase of 81 billion cubic feet for the week ended Sept. 26. But Global Insight is looking for a climb of 62 billion.