Sun, Mar 01, 2009 - Page 10 News List

Oil prices end the week with drop on poor US GDP data

AFP , NEW YORK

World oil prices fell on Friday after three straight days of gains as government data showed the US economy shrank more sharply than expected in the fourth quarter of last year.

New York’s main contract, light sweet crude for April delivery, fell US$0.46 lower from Thursday’s close to end at US$44.76 a barrel.

In London, Brent North Sea crude for April shed US$0.16 to US$46.35 per barrel.

“The market reacted negatively to the GDP figure that came out this morning,” Andy Lipow at Lipow Oil Associates said.

The US economy contracted a stronger-than-expected 6.2 percent in the fourth quarter, the US Commerce Department said just before markets opened Friday, highlighting the meltdown in activity late last year in the world’s biggest oil consuming nation.

The figure was far worse than the negative 5.4 percent annual rate expected by most analysts and the sharpest contraction since the first quarter of 1982.

Oil prices recovered slightly from their lows in line with stocks in late trading, traders said.

“The crude market is wrestling with the fact they’re not sure whether OPEC cut enough production given the decline of demand that we’ve seen,” Lipow said.

Oil prices had surged in recent days in reaction to rising US gasoline stocks and clear indications of output cuts by OPEC.

OPEC announced late last year output cuts of 4.2 million barrels per day in a bid to reverse tumbling prices, and members looked to be sticking to the planned reductions.

“If current price levels do prove to be the base from which oil prices rise, it is going to be a long hard climb, at best,” John Kilduff of MF Global said. “Summer driving season may turn out to be a bust, if consumers choose to stay cautious this year.”

Crude oil prices covered a range between US$37.65 and Thursday’s high of US$45.30 this week, he said.

“The week’s high represented over a 9 percent improvement from last Friday’s settlement, against a very grim macroeconomic backdrop,” he said.

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