Oil Drops to Low of Five Years

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Oil Drops to Low of Five Years

On Friday, prices for crude oil dropped hard with the US benchmark settling at the lowest level in more than five years.

Oil erased some losses briefly after stronger-than expected job reports but then dropped trading the lowest level since mid-2009

Market Watch quoted Jim Rittersbusch, president of oil-trading advisory firm Rittersbusch & Associates as having said, “The jobs report was great, but along with that came a further strengthening of the dollar, and the oil market has generally been prioritizing the dollar strength over economic strength.”

Crude was pressured by the cut of January prices for US by Saudi Arabia and Asian buyers.

On the New York Mercantile Exchange, January delivery crude futures dropped 1.5% or 97 cents settling at $65.84 per barrel, marking the lowest settlement for a front-month contract from July 29 2009.

The US benchmark has ensured a weekly loss of 0.5% after being up for the week earlier on Friday.

January Brent crude on the London ICE Futures exchange dropped 0.8% or 57 cents to $69.07 per barrel. This represented the 1.5% loss for the week and the lowest settlement since October 7 2009.

According to The Wall Street Journal, there are investors who are holding on to the shares of indebted and smaller drillers reluctant to sell with the low prices. Others are paring the exposure back, unwilling to ride the volatility out amid the global supply glut of oil that shows few signs.

Portfolio manager at Penn Capital Management, Eric Green said, “The earnings are going to go down, the revenues are going to go down and in some cases there will be concerns about liquidity.”

January delivery Nymex reformulated gasoline blendstock, the benchmark gasoline contract, dropped by 2 cents settling at $1.77 per gallon.

Investors said that the outlook for energy producers depends mainly on the direction of oil prices. US crude output is expected to increase next year despite falling prices, which means that it is unlikely to have a return to $100.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com