Oil price drops below $73 per barrel

Oil prices fell 1 percent to below $73 a barrel on Friday, marking a more than 8 percent loss for the month, as lagging energy demand outweighed stronger-than-expected U.S. economic data.

U.S. oil for March delivery fell 75 cents to settle at $72.89 a barrel, down $6.47 versus the end-December close.

In London, ICE Brent crude for March fell 67 cents to settle at $71.46 a barrel.

Reports on Friday showed tepid energy demand in Japan and the United States, adding to data this week showing rising U.S. fuel stockpiles and expectations that OPEC producers will boost exports.

U.S. oil demand shrank 2 percent in the past four weeks from a year earlier, while Japanese data showed crude imports fell 2.6 percent in December and gasoline sales tumbled 2.4 percent.

The data offset news that the U.S. economy grew a faster-than-expected 5.7 percent in the fourth quarter of 2009, the quickest pace in more than six years, according to the U.S. Commerce Department.

U.S. stock markets fell as worries about fiscal turmoil in Europe offset the encouraging U.S. GDP data. The oil market has looked to wider economic data for signs of economic recovery and a potential rebound in energy demand.

“Equities are down and the euro continues to fall against the dollar. If stocks end down and leave a bad taste in the mouth to end the month then there could be some negative follow through next week,” said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

Oil prices have been pressured this week by a stronger dollar, which on Friday rose to its highest level in more than six months against the euro on jitters about European economies including Greece and Portugal.

A stronger dollar often indicates investors are funneling cash away from riskier assets, such as commodities. It also can curb demand for crude oil from buyers who hold other currencies, since oil is priced in dollars.

China’s moves to rein in credit also raised concerns about the pace of economic growth and oil demand.

“Current prices do not reflect the fundamentals of demand and supply and could go a lot lower,” said Eugen Weinberg, commodities analyst at Commerzbank.

Chevron Corp posted a 37 percent drop in quarterly profit, missing Wall Street forecasts, as steep losses at its refineries offset gains from higher oil prices and production.

The chief executive of oil major Royal Dutch Shell told Reuters Insider oil would not go back to its 2008 peak level of more than $140 a barrel and was instead expected to trade in a $60 to $80 range.

This view found resonance in Tehran, where Iran’s OPEC governor was quoted on Friday as saying that oil prices would not drop below $60 per barrel by July.

Source: Reuters

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