Crude drops on demand concerns

Earthquake at Japan push prices lower

Oil prices dropped on Friday, 11 March 2011. Prices dropped as powerful earthquake coupled with Tsunami hit Japan thereby fuelling demand concerns.

On Friday, crude oil futures for light sweet crude for April delivery closed lower by $1.54 (1.4%) at $101.16/barrel. Prices touched a low of $99.01 during intra day trading. For the week, prices closed lower by 3.1%.



Crude prices gained 5.2% in February 2011 after gaining 0.9% in January.

Japan is a top consumer of commodities just following China.

Among domestic economic data expected for the day on Friday, the preliminary Consumer Sentiment Survey for March from the University of Michigan came in at 68.2, which marked its worst reading in five months and was well short of expectation.

Advance retail sales for February showed a 1% increase, in line with expectations. Excluding autos, retail sales increased by 0.7%, which is narrowly better than the 0.6% increase that had been expected. Retail sales for January were revised upward to reflect a 0.7% increase.

January business inventories showed a 0.9% increase, which is slightly stronger than the 0.8% increase that had been broadly expected.

In the latest monthly report, The Energy Information Administration raised its average estimate for crude oil bought by refiners to $105 a barrel in 2011, up $14 from its outlook last month. It also raised its forecast for the light, sweet grade trading on the Nymex to an average $102 this year, up $9, as turmoil continued to roil Libya and protests erupted in other oil-producing countries.

The EIA also cut expectations for production outside OPEC to 170,000 barrels a day this year from a February estimate of 310,000 barrels a day. In addition, the agency pared its estimate of OPEC surplus capacity to 4.1 million barrels a day in 2011, from an estimate of 4.4 million barrels a day in 2010.

Latest reports indicate that the Organization of Petroleum Exporting Countries recorded its highest February output since 2008, despite the loss of production from Libya. OPEC estimated February production at 30.2 million barrels a day, the highest since December 2008.

Among other energy products on Friday, gasoline for April delivery was off 3 cents, or 1.1%, to settle at $2.99 a gallon. On the week, the fuel dropped 1.8%. April heating oil retreated 2 cents, or 0.5%, to $3.03 a gallon. Heating oil declined 1.9% in the week.

Natural gas also for April delivery gained 6 cents, or 1.5%, to $3.89 per million British thermal units, posting weekly gains of 2.1%.