Crude oil declines as traders view year-end gains as excessive
Crude oil fell on speculation that a 14 percent gain at the end of last year was unjustified because of lower demand in the leading energy consuming countries, Bloomberg reported.
Manufacturing in the U.S., the biggest energy user, probably contracted in December at the fastest pace in almost 30 years, economists said before a report today. Oil climbed on Dec. 31 as U.S. fuel supplies rose less than expected, and as the conflict in Gaza raised concern that Middle East supplies would be cut and Russia threatened to cut natural-gas shipments to Ukraine.
"I think the main reason for today's drop is that Wednesday's gain was way overdone," said Tom Bentz, senior energy analyst at BNP Paribas in New York. "The threatened cutoff of gas to Ukraine as well as the violence in Gaza may have spurred buying before the holiday."
Crude oil for February delivery fell 52 cents, or 1.2 percent, to $44.08 a barrel at 9:30 a.m. on the New York Mercantile Exchange. Oil fell 54 percent last year, the first annual decline since 2001 when oil fell 26 percent, and the biggest drop since trading began in 1983.
Russia and Ukraine prepared to resume talks in their dispute over natural-gas prices after OAO Gazprom cut supplies for the second time in three years. Ukrainian President Viktor Yushchenko said yesterday the two sides are near a compromise, urging state utility NAK Naftogaz Ukrainy and Gazprom, Russia's gas exporter, to meet again in the next one or two days.
"At least the Russians and Ukrainians are now talking," Bentz said. "There may have been a rush to buy gasoil as an alternative to natural gas."
The Standard & Poor's GSCI Index of 24 commodity futures lost 43 percent last year, the most since its introduction in 1971. The Reuters/Jefferies CRB Index of 19 raw materials dropped 36 percent, the biggest plunge since 1957.
Brent crude oil for February settlement declined 79 cents, or 1.7 percent, to $44.80 a barrel on London's ICE Futures Europe exchange.