SIOUX FALLS: Falling crude demand in the world's largest consuming nation drove oil prices below $38 a barrel Monday as the US enters a corporate
earnings season expected to be fraught with bad news.
Economic worries outweighed factors that would normally boost the market — Mideast tensions, signs that OPEC was implementing large-scale production cuts, the ongoing Gazprom-Ukraine gas dispute and a winter likely to feature the coldest weather in a decade.
``It's amazing what the market's ignoring,'' said Phil Flynn, an analyst at Alaron Trading Corp. ``That really tells you the story of how bearish this is.''
Light, sweet crude for February delivery fell 7 per cent, or $2.91, to 37.92 a barrel on the New York Mercantile Exchange. The contract on Friday fell 87 cents to settle at $40.83.
``Clearly, the focus this morning is back on the macroeconomics, and the concern that the demand for oil is just not going to be there any time soon, and there's going to be plenty of oil out there,'' Flynn said.
Steel producer Alcoa, chip maker Intel and biotech company Genentech are expected to report fourth quarter results this week, giving investors a glimpse of how deep the current recession may be.
``Given that we're likely to see quite a few rather poor fourth quarter earnings reports, downward pressure will continue to be exerted on oil,'' said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. ``Worries about the macroeconomic outlook will continue to constrain oil.''
Although still far away from their Dec. 19 closing of $33.87, oil prices fell 17 per cent last week, weighed by fears that rising US unemployment will undermine crude demand.
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