In The News
Oil settles at $40.78 as traders mull mixed U.S. data
SINGAPORE — Oil hovered near $41 a barrel Wednesday in Asia as investors mulled the impact of OPEC production cuts and mixed signs about the U.S. economy.
Light, sweet crude for March delivery fell 14 cents to $40.64 a barrel by late afternoon in Singapore in electronic trading on the New York Mercantile Exchange. The contract overnight rose 70 cents to settle at $40.78.
Investors have been struggling to gauge the depth of the worst recession in more than 25 years in the U.S., which is the world's largest consumer of oil. Prices, which had plunged to $33 by December after jumping to a record $147.27 a barrel in July, have stabilized in the low $40s for the last week.
A jump in home sales reported Tuesday suggested the economic downturn could be bottoming. Pending sales for preowned homes rose 6.3 percent in December from the previous month, according to the National Association of Realtors.
Other indicators pointed to a worsening slowdown. U.S. car and truck sales fell 37 percent in January, including a 49 percent drop at General Motors Corp. and 40 percent at Ford Motor Co.
Some corporate results were also grim. Mobile phone maker Motorola Inc. said it lost $3.6 billion last quarter and suspended its dividend. The Walt Disney Co. reported a 32 percent decline in quarterly profits Tuesday.
Disney Chief Executive Robert Iger said the current recession is "likely to be the weakest economy in our lifetime."
"While the U.S. macro picture remains bleak, a lot of the negative demand has already been priced in," said Toby Hassall, an analyst with investment firm Commodity Warrants Australia in Sydney. "There are some indications that OPEC supply cuts are going some way toward rebalancing the market as well."
The Organization of Petroleum Exporting Countries has promised to reduce output by 4.2 million barrels since September, and the group's leaders have hinted that the cartel could cut production more during the next few months if prices don't recover.
OPEC may be hesitant to make further output cuts because higher crude costs could prolong the global economic slowdown and undermine member nations' longer-term income from oil.
"I think OPEC will be wary of cutting further," Hassall said. "The world economy is still shaky, and in the long term they don't want to contribute to a recession being longer and deeper than it needs to be."
Investors are watching global stock markets for signs of optimism about the economy and crude demand. The Dow Jones industrial average rose 1.8 percent Tuesday.
"Oil prices should be fairly flat for the next few months, which should be somewhat correlated to what happens in equity markets," Hassall said. "At the moment, stock markets provide a barometer of overall market sentiment."
In other Nymex trading, gasoline futures rose 0.60 cent to $1.17 a gallon. Heating oil was steady at $1.32 a gallon while natural gas for March delivery dropped 1.3 cents to $4.50 per 1,000 cubic feet.
In London, the March Brent contract rose 2 cents to $44.10 on the ICE Futures exchange.
Dorothy Cox of The Trucker staff may be reached to comment at [email protected].