Crude slips lower on demand concerns and higher dollar

Prices settle at almost two week lows

Crude prices ended considerably lower on Tuesday, 12 December 2011 at Nymex. Prices turned pale due to demand concerns and as the dollar headed up substantially higher. The dollar turned strong mainly against the euro. U.S. stocks and the euro extended a decline in midday trading on Monday after Fitch Ratings said Europe's debt crisis will continue in 2012 as a comprehensive solution remains elusive, leading to a significant economic downturn there. Prices settled at almost two week lows.



Light and sweet crude for January delivery dropped $1.64 (1.7%) to $97.77 a barrel on the New York Mercantile Exchange on Monday. Last week, crude lost 1.5%. For the month of November, oil futures gained 7.7%.

Reports from last week's eurozone summit initially generated a positive response, but many traders expressed skepticism in the ability of eurozone members to efficiently implement plans and reach an agreement on those topics that couldn't be brought to a consensus. The concern that the process will simply continue to slog along without producing real results sent yield spreads higher on debt from Italy and Spain, and also spurred concerted selling among the region's major bourses.

In the currency market on Monday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies rose by about 1.1%.

In addition to concerns about Europe, market participants dealt some relatively discouraging data from China. Although China experienced export growth during November that exceeded what some had anticipated, the rate of increase was slower than that of the prior month.

Among other energy products on Monday, January natural gas dropped 6 cents to end at $3.25 per million British thermal units.

January gasoline was off 3 cents, or 1.3%, to settle at $2.56 a gallon. January heating oil declined 2 cents, or 0.6%, to finish at $2.90 a gallon. Heating oil has closed lower for four straight sessions.

At the MCX, crude oil for December delivery closed higher by Rs 17 (0.32%) at Rs 5,203/barrel. Natural gas for December delivery closed at Rs 174.2, lower by Rs 0.9 (0.51%).