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Crude Oil Futures Fall Amid Negative Stock Market Sentiment

Strategic Insights

— 2 min read

Crude oil futures fell for the second session on Monday, pressured by a stronger dollar and negative stock market sentiment. The price of light, sweet crude for May delivery settled at $51.05 a barrel on the New York Mercantile Exchange, a decline of $1.46, or 2.8%, from the previous session. This drop was accompanied by a decline in Brent crude, which closed at $52.25 a barrel on the ICE Futures exchange.

Traders were influenced by the U.S. stock market, which was broadly lower, with the Dow Jones Industrial Average down about 100 points at the close of Nymex floor trading. "On some days the market just moves in lockstep with what the financial markets are doing," said Andy Lebow, senior vice president for energy at brokerage MF Global in New York.

The recent production cuts from the Organization of Petroleum Exporting Countries have brought supply in line with weaker consumption, causing some traders to interpret the stock market rebound as a sign of improved demand. However, the government statistics released last week showed U.S. demand down 4.4% from a year earlier. This led Lebow to note that "it's all on hope" instead of real improvement in demand.

Key Takeaways:

  • Crude oil futures fell for the second session on Monday, pressured by a stronger dollar and negative stock market sentiment.
  • The price of light, sweet crude for May delivery settled at $51.05 a barrel on the New York Mercantile Exchange, a decline of $1.46, or 2.8%, from the previous session.
  • Brent crude closed at $52.25 a barrel on the ICE Futures exchange, a decline of $1.22 from the previous session.
  • The recent production cuts from the Organization of Petroleum Exporting Countries have brought supply in line with weaker consumption.
  • U.S. demand for crude was down 4.4% from a year earlier, according to government statistics released last week.
  • High inventories and a weak demand picture will curb any price upside near term, according to Helen Henton, head of commodity research at Standard Chartered Bank.
  • A strengthening dollar diminished commodities' attractiveness as a currency hedge.
  • Saudi Arabian Oil Co., or Saudi Aramco, lowered its official selling prices for most grades of crude to be delivered in Asia, the U.S. and Europe next month.

Statistics:

  • Crude oil futures fell by $1.46, or 2.8%, to settle at $51.05 a barrel.
  • Brent crude fell by $1.22 to close at $52.25 a barrel.
  • U.S. demand for crude was down 4.4% from a year earlier.
  • U.S. crude stockpiles stood at their highest level since 1993.
  • The euro was recently $1.3398, off a daily high of $1.3582.

Sources:

  • Dow Jones Commodities News via Comtex, April 6, 2009.
  • Interview with Andy Lebow, senior vice president for energy at brokerage MF Global in New York.
  • Helen Henton, head of commodity research at Standard Chartered Bank.
  • Goldman Sachs analysts led by Jeffrey Currie.
  • Saudi Arabian Oil Co., or Saudi Aramco.

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