NEW YORK, N.Y. – The price of crude fell Thursday following a reported drop in U.S. consumer confidence and also growing pessimism that political leaders in Washington can reach a budget deal.
By afternoon, U.S. benchmark West Texas Intermediate crude had fallen 65 cents to US$90.33 barrel on the New York Mercantile Exchange. Brent crude, used to price various international varieties oil, was down 87 cents to $110.20 per barrel.
Senate Majority Leader Harry Reid said the United States appears headed for automatic tax hikes and spending cuts on Jan. 1 because of a lack of progress in budget negotiations between President Barack Obama and Congress. With time running out to avoid a “fiscal cliff,” traders fear that the U.S. could slip into another recession, which would cut demand for energy.
The budget negotiations have begun to drag on consumer confidence, and that too can affect energy prices.
The consumer confidence index fell this month to 65.1, down from 71.5 in November, according to the Conference Board. It was the second straight monthly decline and the lowest level recorded since August.
Thursday’s decline in oil followed a big gain from the day before, when reports of higher U.S. home prices and hopes of a budget deal fuelled optimism in the market.
Investors will be monitoring fresh information on U.S. stockpiles of crude and refined products over the next day. Crude oil supplies are expected to shrink by two million barrels for the week ended Dec. 21, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
(TSX:ECA), (TSX:IMO), (TSX:SU), (TSX:HSE), (NYSE:BP), (NYSE:COP), (NYSE:XOM), (NYSE:CVX), (TSX:CNQ), (TSX:TLM), (TSX:COS.UN), (TSX:CVE)
That drop could be due in large part to refineries using more crude to produce gasoline, diesel and other refined products. Tom Pawlicki, director of market research at EOX Live, told Platts that gasoline supplies should rise as refineries ramp up.
“Demand has been trending lower since mid-November and shouldn’t pressure inventories much,” Pawlicki said.
In other energy futures trading on the Nymex, wholesale gasoline fell one cent to US$2.78 a U.S. gallon (3.79 litres), heating oil was unchanged at US$3.04 a gallon and natural gas lost two cents to $3.38 per 1,000 cubic feet.
