Friday, March 26, 2010

Crude futures end lower on demand concerns / Concerns about energy demand tipped the scales for bears

By Polya Lesova & Claudia Assis, MarketWatch
SAN FRANCISCO (MarketWatch) -- Crude-oil futures ended 0.7% lower Friday, as concerns about energy demand superseded earlier gains from an advance in the euro against the dollar.

Crude for May delivery, the most active contract, lost 53 cents to $80 a barrel in the New York Mercantile Exchange. Oil headed below $80 in electronic trading after the market close.

Concerns about demand won the day in a difficult week for oil, which saw a larger-than-expected build in crude-oil inventories. For the week, oil lost 1.2%.

"A bearish specter haunts the market after this week's build on inventories," said Jason Schenker, president of Prestige Economics in Austin. "So the market was looking for any cues to move lower."

Investors wavered between focusing on the good news on the currency side, with the dollar losing ground versus the euro, and their demand expectations, said Phil Flynn, vice president at futures trading and research firm PFGBest Research in Chicago.

A Commerce Department report early Friday showed a slightly lower revision in its estimate for fourth-quarter gross domestic product, and the "not so bullish" U.S. data raised some concern about oil demand, Flynn added.

Inflation-adjusted GDP increased at a 5.6% annualized pace in the final three months of 2009, revised down from the 5.9% pace reported a month ago, even though it was still the fastest growth pace seen in six years. The revision was largely in line with expectations of economists surveyed by MarketWatch.

Meanwhile, data from the University of Michigan showed consumer sentiment for March unchanged at a reading of 73.6, slightly better than estimates of around 73.

The euro gained against the dollar as euro-zone members and the International Monetary Fund agreed to jointly provide aid to debt-ridden Greece if needed. But details of the plan, including the size of any financial aid, remain unclear.

Investors remain concerned about Europe, however, and any bad news from a handful of countries on the periphery of the euro zone would have a negative impact on markets, Flynn added.

In addition to European news, traders will be watching intently the next round of inventory data next week, as well as Friday's employment report, even though most financial markets will be closed that day in observance of Good Friday, Schenker said.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 81.68, -0.44, -0.54%) , which measures the greenback against a basket of six major currencies, fell 0.5% to 81.70. A weaker U.S. currency generally bodes well for oil and other dollar-denominated commodities.

Natural gas for May delivery ended 10 cents lower, or 2.5%, at $3.93 per British thermal units, while gasoline for May delivery decreased a penny, or 0.5%, to $2.2085.

Polya Lesova is reporter for MarketWatch, based in Frankfurt.

Claudia Assis is a San Francisco-based reporter for MarketWatch.

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