Crude dips on demand worries

Prices drop as S&P cuts its outlook for U.S. debt to negative from stable

Demand concerns pushed down oil prices on Monday, 18 April 2011 at Nymex. Prices dropped after Standard and Poor revised its outlook for U.S. debt to negative from stable, casting a pall over the finances of the world's largest economy. Prices also dropped due to a strong dollar.


On Monday, crude oil futures for light sweet crude for May delivery closed lower by $2.55 (2.3%) at $107.12/barrel. Last week, prices lost 2.8%.

For the year till date, crude prices have gained 17.7%. Crude prices gained 10% in March 2011. For the first quarter of this year, crude gained 17%.

Before the start of U.S. trading, Standard & Poor's said it slashed its outlook on the U.S. to negative from stable, though it kept its triple-A rating on the world's largest economy.

Although officials tried to shoot down speculation about debt restructuring in Greece, recognition of such a possibility prompted questions about whether a restructuring would lead to similar action in Ireland and Portugal, then thoughts of the implications for the overall eurozone. Such concerns took their toll on the euro.

Earlier Monday, Saudi Arabia announced it had cut output for March due to the weaker demand. Saudi Arabia's output reportedly reached 8.292 million barrels a day, down from 9.125 million in February..

In the currency market on Monday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.9%.

Among other energy products on Monday, gasoline for May delivery traded down 4 cents, or 1.1%, to $3.25 a gallon. May heating oil retreated 4 cents, or 1.3%, to $3.18 a gallon.

May natural gas retreated 7 cents, or 1.6%, to $4.14 per million British thermal units.

At the MCX, crude oil for May delivery closed lower by Rs 77 (1.6%) at Rs 4,831/barrel. Natural gas for April delivery closed lower by Rs 3.3 (1.8%) at Rs 184.2.