Crude oil futures settle back at $68/barrel
Investor confidence in economic recovery falters
Tom Stundza -- Purchasing, 9/2/2009 2:37:27 PM
Futures of light, sweet crude oil for October delivery
traded at $68.27/barrel this morning on the New York Mercantile Exchange
(Nymex) as investors continued to switch from commodities to dollar-based
securities. Futures were $69.95 on Monday and $68.05 on Tuesday, the first
times they closed trading below $70 a barrel since August 18.
Various news service reports say that speculators basically have ignored the Institute for Supply Management report Tuesday of a mild expansion in U.S. manufacturing after 18 months of decline. The ISM index rose to 52.9% in August, the first time the index has been above 50% since the early days of the recession in January 2008. This should be a sign that industrial activity, and oil demand, are climbing out of their recession lows. But, Energy Information Administration (EIA) data shows real demand struggling to match even last year's weakened level. Gasoline demand, for example, is down 2% in the four weeks ended Aug. 28 compared with a year earlier, according to MasterCard Advisors.
As reported, weak demand has kept oil inventories high, with U.S. stockpiles tracked by EIA still 12% above last year's level. Analysts say any additional demand generated by increased manufacturing activity is also being countered by increased production from the Organization of Petroleum Exporting Countries. The cartels' compliance with 4.2 million barrels/day in cuts agreed to last year now stands at 65%, according to a Dow Jones Newswires survey. Compliance was 77% in June.
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