MW: Crude prices drop below $74 a barrel on China move
By Polya Lesova, MarketWatch
FRANKFURT (MarketWatch) -- Oil futures fell 2% on Friday, as China's move to hike bank reserve requirements sparked concern over a slowdown in its growth and appetite for commodities.
Crude oil for March delivery dropped $1.56, or 2%, to $73.72 in electronic trading on Globex.
Earlier, the contract hit an intraday low of $73.56 a barrel.
The People's Bank of China said Friday it will raise the ratio of reserves banks must set aside by 0.5 percentage points, the second such move this year. The news triggered a rally in the U.S. dollar and a sell-off in stock futures and commodities.
"Oil prices are sharply lower after China, the world's second largest oil consumer, took steps to cool its economic expansion," said analysts at Action Economics.
The dollar index (DXY 80.61, +0.61, +0.77%) , which tracks the performance of the greenback against a basket of other major currencies, rose 0.8% to 80.703. Futures on the Dow Jones Industrial Average dropped 71 points, or 0.7%, to 10,039.
Weak European economic data also weighed on oil prices. The economy in the 16-nation euro zone grew 0.1% compared to the third quarter, and dropped 2.1% compared to the fourth quarter of 2008, official data showed.
Germany's economy, Europe's biggest, stagnated in the fourth quarter, contrary to expectations of 0.2% growth quarter-on-quarter.
Oil prices may come under further selling pressure on Friday after the release of government data on petroleum inventories. The report from the Energy Information Administration, due at 11 a.m. Eastern, is two days later than usual.
Analysts polled by Platts expect a 2-million-barrel increase in crude supplies for the week ended Feb. 5. They also project an increase of 1 million barrels in gasoline inventories and a decline of 1.75 million barrels in distillate stockpiles.
The American Petroleum Institute reported Tuesday that U.S. crude supplies increased by 7.2 million barrels last week.
The EIA will also report natural-gas inventories at 10:30 a.m. on Friday.
Oil futures ended with gains every session so far this week. They rose on Thursday after the European Union pledged to help Greece deal with its debt crisis and the International Energy Agency raised its forecast for global oil demand.
