BLBG: Oil Falls the Most in Three Months as Dollar Gains, Stocks Drop
By Mark Shenk
Feb. 4 (Bloomberg) -- Crude oil declined the most in three months as the dollar gained and a worldwide drop in stocks bolstered skepticism that the economic recovery will be sustained.
Oil fell as much as 3.2 percent as the greenback climbed versus the euro, curbing the appeal of commodities as an alternate investment. Standard & Poor’s 500 Index dropped after more Americans unexpectedly filed first-time claims for unemployment insurance last week, raising concern that an improvement in the job market is stalling.
“Oil is down because of the dollar’s strength and the poor fortunes of the S&P, especially after the jobs report,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The whole commodity sector is looking weak today.”
Crude oil for March delivery fell $2.34, or 3 percent, to $74.64 a barrel at 10:11 a.m. New York time. Oil declined as much as $2.48 to $74.50, and is heading for the biggest daily drop since Oct. 30. Prices are up 85 percent from a year ago.
The dollar climbed to the highest level against the euro since June after European Central Bank President Jean-Claude Trichet said the economic outlook is subject to “uncertainty.”
The dollar traded at $1.3809 per euro, up from $1.3893 yesterday. It traded earlier at $1.3778, the highest level since June 16.
The S&P 500 lost 2 percent to 1,075.91 and the Dow Jones Industrial Average dropped 1.7 percent 10,096.65.
Jobless Applications
U.S. initial jobless applications rose to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, figures from the Labor Department showed today.
“Folks may be worried about the jobless numbers,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Hopes of future expansion of the economy have supported this market. The initial jobless numbers are a reminder that we aren’t there yet.”
Prices also dropped on an Energy Department report yesterday that showed the U.S. stockpiles of crude oil climbed last week as refineries idled units. Supplies rose 2.32 million barrels to 329 million in the week ended Jan. 29.
U.S. refineries operated at 77.7 percent of capacity, the lowest rate since at least 1989, excluding two periods of hurricane strikes along the Gulf of Mexico, according to the report.
“Without positive economic news you have to look at the fundamentals, and they don’t support prices at this level,” Mueller said.
Brent crude for March settlement fell $2.32, or 3.1 percent, to $73.60 a barrel on the London-based ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
