Oil touches $75, then falls on deficit numbers
By JOHN PORRETTOWed Aug 26 03:51:59 EST 2009
Tue Aug 25 17:51:59 UTC 2009
Oil touches $75, then falls on deficit numbers
Eds: UPDATES prices. For global distribution.
AP Energy Writer
HOUSTON (AP) - Oil prices fell more than 2 percent Tuesday after
a new report from Washington projected a cumulative $7 trillion U.S.
deficit for the next decade.
Minutes before the nonpartisan Congressional Budget Office
released its deficit forecast, however, crude briefly touched $75 a
barrel for the first time in 10 months on new signals that consumers
are feeling a little better about the economy.
Questions about when energy demand will rebound has led to
volatile prices and that uncertainty played out again on energy
markets Tuesday.
"Oil still struggles to follow through decisively with an upside
breakout," PFGBest Research analyst Phil Flynn said in a note to
clients Tuesday. "Is oil destined to make new highs, or is it just
a matter of time before we see a correction of massive
proportions?"
Benchmark crude for October delivery fell $1.59 to $72.78 a
barrel in trading on the New York Mercantile Exchange.
The New York-based Conference Board provided a bit of good news
when it said its Consumer Confidence index rose to 54.1 from an
upwardly revised 47.4 in July. Economists surveyed by Thomson
Reuters had expected a slight increase to 47.5.
Still, the index is well below 90, the minimum level associated
with a healthy economy. Anything above 100 signals strong growth.
Energy prices have risen sharply this year mostly on the belief
that the economy is getting better and demand will rebound soon.
Still, the rules of supply and demand still apply to current prices
and on Wednesday, the government will release its weekly report on
how much supply we have.
Last week, a surprise drawdown in crude began a rally that ran
through Monday, the fourth-consecutive day in which oil prices moved
higher.
Despite optimism about recovery from recession, analysts say
energy demand remains in the doldrums and seasonally lower demand
for gasoline as the summer holidays end will exacerbate that
weakness.
"In my view, oil prices will likely give in to the fundamentals
in the coming week," said Victor Shum, an energy analyst with
consultancy Purvin & Gertz in Singapore. "Seasonally, oil demand is
lower in autumn, so reduced demand in the shoulder season may put
further pressure on oil."
In other Nymex trading, gasoline for September delivery fell 3.21
cents to $2.02 a gallon and heating oil fell 4.24 cents to $1.881 a
gallon. Natural gas fell 8.7 cents to $2.836 per 1,000 cubic feet.
In London, Brent crude fell $1.16 cents at $73.10.
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Associated Press writers Eileen Ng in Kuala Lumpur and Carlo
Piovano in London contributed to this report.
AP-TK-25-08-09 1740GMT
