New York oil prices fell on Friday on profit-taking following big gains this week, amid renewed concerns about sagging energy demand and as traders wound down contracts for next month.
New York’s main futures contract, light sweet crude for delivery in April, fell US$0.55 from Thursday’s close to end the week at US$51.06 per barrel.
The New York contract soared Thursday as high as US$52.25 — the highest level since Nov. 28 — after topping US$50 for the first time in four months.
In London, Brent North Sea crude for May delivery, however, climbed US$0.55 to US$51.22.
Crude oil and other commodities had won a major boost on Thursday after the US Federal Reserve unveiled a plan to inject US$1.15 trillion into the financial system of the world’s biggest economy and largest energy consuming nation.
Mace Blicksilver of Marblehead Asset Management said profit taking on Friday pushed down prices.
“But next week is going to be critical, we’re in the quarter end period, what you want to see is that there are buyers,” he said. If not, “you can be sure that people will start to head for the exits, and you’ll be right down at the lows by the beginning of April.”
Andy Lipow of Lipow Oil Associates said that the overall market remained concerned about the ballooning US budget deficit and fears that the Fed had to print a lot of money to mop up bonds, stoking inflation and dampening the US dollar.
The perception was that “not only oil but all the commodities are going to rise as an inflation hedge,” Lipow said.
A weaker greenback tends to boost oil prices because it makes dollar-priced crude cheaper for buyers using stronger currencies.
Thursday’s strong price rally for crude oil and refined products was a “strong expression of investor’s concern over a faltering dollar and the specter of rapidly rising inflation once the economy starts to recover,” Mike Fitzpatrick of MF Global said.
“We have been saying this for months. In the very short run however, with crude stockpiles swelling and energy demand still relatively weak, it may prove difficult to sustain the rally,” he said.
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