US economic worries weigh down crude oil prices

Oil prices slipped on Friday, weighed down by the front-month contract's expiration next week and the stock market's continued weakness, a possible harbinger of an economic slowdown.

Light, sweet crude for April delivery fell US$0.44 to settle at US$57.11 a barrel on the New York Mercantile Exchange. The contract dropped as much as US$1.38 to US$56.17 in late afternoon trading.

"This is a market hitting the skids going into the April contract's expiration on Tuesday," said Tim Evans, energy analyst at Citigroup Global Markets.

"All the speculative activity is in May and June. That's why you see a larger drop in the April contract than in May," Evans said.

The NYMEX May contract settled at US$59.58 a barrel, down US$0.38. It fell as much as US$1.16 to US$58.80 a barrel during the sell-off, while the June contract lost as much as US$1.01 to US$60.22.

May Brent crude on the ICE Futures exchange in London dropped 38 cents to settle at US$60.30 a barrel.

Friday's decline in the stock market also undermined prices, Peter Beutel of Cameron Hanover in New Canaan, Connecticut, said.

"The market has seen strong demand, but traders are starting to look ahead to the possibility that demand could be eaten into by a slowdown," he said.

However, Phil Flynn of Alaron Trading Corp in Chicago said that fundamentals remain supportive of crude oil prices.

"The IEA report this week was bullish. The DOE's report was bullish. We have less supply than a year ago and more demand," Flynn said. "This week, the market has been held back because of uncertainty in the economy."

The International Energy Agency forecast on Tuesday the biggest first-quarter decline in crude oil inventories in industrialized countries in 10 years. On Wednesday, the Energy Department reported that crude inventories rose less than expected, while supplies of gasoline and distillates declined more than estimated.

Also this week, OPEC agreed not to change its output targets, as expected. OPEC ministers said at a meeting on Thursday in Vienna that they had decided to maintain the oil cartel's crude production at existing levels, satisfied that two recent rounds of output cutbacks have helped to boost sagging oil prices and balance global oil markets.

"The market is stable, the market is healthy," OPEC Secretary-General Abdalla Salem el-Badri of Libya said.

"We don't need to touch it this time," he said.

In other NYMEX trading, heating oil futures rose a fraction of a cent to settle at US$1.6888 a gallon (US$0.4461 per liter), while natural gas prices slipped US$0.035 to US$6.924 per 1,000 cubic feet (US$0.2445 per cubic meter). Gasoline futures gained more than 2.5 cents to settle at US$1.9071 a gallon (US$0.5038 per liter).