Light, sweet crude for March delivery rose 35 cents to US$40.43 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange.
The contract fell $1.60 overnight to settle at $40.08.
Oil prices have fallen about 72 percent since peaking at $147.27 a barrel in mid July as a financial crisis in the U.S. sub-prime mortgage sector mushroomed into the worst worldwide economic slowdown in decades.
"I think the world is underestimating the power of this recession," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital in Singapore.
"It's still unfolding. It could be really, really ugly," he said.
Moltke-Leth expects oil to fall to as low as $28 a barrel by the end of the March. Personal consumption spending fell 1 percent in December, a sixth consecutive drop, the Commerce Department reported Monday.
Total construction spending dropped by 1.4 percent in December, worse than the 1.2 percent decline economists expected.
Retailer Macy's Inc. was the latest company to announce mass layoffs, saying Monday it would slash 7,000 jobs, or 4 percent of its work force, less than a month after announcing it would close 11 stores.
Caterpillar Inc., which makes construction equipment, announced on Friday that it will lay off another 2,110 employees, in addition to the 20,000 job cuts announced the previous week, and software maker IBM Corp. cut thousands of jobs last month.
Recent comments from OPEC leaders that the group may cut production soon have helped bolster prices.
The Organization of Petroleum Exporting Countries has pledged to reduce output by 4.2 million barrels since September.
"There's a lot of chatter from OPEC about having to cut further," said Moltke-Leth.
"I don't see it happening because they need the cash, so it's hard for OPEC to credibly talk the market higher."
Crude inventories in the U.S. have soared as drivers cut back on spending.
A report Tuesday by the American Petroleum Institute, the industry's trade association, is expected to show that oil stocks rose 2.9 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
U.S. Energy Department's Energy Information Administration reports its inventory data on Wednesday.
Oil stocks have grown more than 20 million barrels in the last four weeks, evidence the U.S.'s worst recession since more than 25 years may be deepening as consumer demand dries up.
In other Nymex trading, gasoline futures rose 1.58 cents to $1.17 a gallon.
Heating oil gained 1.01 cents to $1.35 a gallon while natural gas for February delivery jumped 6.2 cents to $4.62 per 1,000 cubic feet.
In London, the March Brent contract rose 75 cents to $44.57 on the ICE Futures exchange.
SIOUX FALLS, South Dakota: Oil prices tumbled nearly 4 percent Monday in a volatile trading day fraught with more bad economic news, including thousands of job cuts by Macy's department store.
Light, sweet crude for March delivery fell $1.60 to settle at $40.08 a barrel on the New York Mercantile Exchange after tumbling at one point to $39.83.
Americans have cut spending on everything from clothes to gasoline, and those cuts are showing up in falling crude prices and tumbling sales for retailers.
Macy's Inc. said it would slash 7,000 jobs, or 4 percent of its work force, less than a month after announcing it would close 11 stores.
Stocks were mixed Monday morning after the Institute for Supply Management said U.S. manufacturing activity rose during January from a record low.
But after oil gave up its gains, the Dow fell more than 100 points in afternoon trading.
"Anytime you get any relatively positive data, it tends to react accordingly and you get a nice little bounce out of it," said Bob Yawger, vice president of energy futures for MF Global.
"Now we've retraced it over since then."
Gasoline futures had been one of the only commodities on the New York Mercantile Exchange to remain steady last week with some 24,000 refinery workers threatening to strike.
Negotiations were extended and workers showed up as usual Monday.
Gasoline futures tumbled more than 9 percent.
Still, retail gasoline has been rising for a month as refiners cut back production.
Phil Flynn, an analyst at Alaron Trading Corp., said most people believe there will be a deal reached with refinery workers.
"Obviously these talks can turn the other way. And if they do, the markets can turn the other way," Flynn said.
"But I think getting through the weekend without a strike was enough for the market to speculate that they'll probably get a deal done."
That aimed traders' eyes on the economy, and there was no shortage of bad news.
Consumer spending fell for a record sixth straight month in December as recession-battered households, worried about surging layoffs, boosted their savings rates to the highest level since May.
And the Commerce Department reported that total construction spending dropped by 1.4 percent in December, slightly worse than the 1.2 percent decline economists expected.
Analyst and trader Stephen Schork, writing in his Schork Report publication, said the "market's knee-jerk euphoria" with Friday's news that the U.S economy at the end of 2008 was less dead than originally feared was "misguided to say the least."
Private businesses increased their inventories by $6.2 billion in the fourth quarter, following two previous quarterly decreases, suggesting they won't need to replenish until the current glut is cleared.
That doesn't bode well for industrial commodities such as crude oil, he said.
There were signs that OPEC members were generally complying with significant output reductions, but it was unclear whether that had buoyed prices.
After a year when oil prices soared to a record $147 a barrel in July only to collapse to $33 in December, crude has traded in the low $40 range for the last week or so as investors eye weakening crude demand matching OPEC production cuts.
The Organization of Petroleum Exporting Countries has promised to slash output by 4.2 million barrels and has suggested more production cuts may be on the way.
In other Nymex trading, gasoline futures tumbled 19 cents to settle at $1.1535 a gallon.
Heating oil slid 9.16 cents to settle at $1.3424 a gallon while natural gas for March delivery rose 14 cents to settle at $4.557 per 1,000 cubic feet.
In London, the March Brent contract slumped $2.06 to settle at $43.82 on the ICE Futures exchange.
No comments:
Post a Comment