US crude drops $1.45 on China, Fed, stronger dollar

21 June 2013 20:51  [Source: ICIS news]

HOUSTON (ICIS)--US West Texas Intermediate (WTI) crude oil futures experienced follow-through selling again on concerns about waning demand from China and an eventual end to the US Federal Reserve's bond-buying programme known as qualitative easing 2 (QE2).

The dollar also continued its climb against a basket of currencies, putting further downward pressure on oil, overshadowing modest gains in the stock market.

August NYMEX futures finished the first session as front-month trading by declining $1.45 to close at $93.69. August Brent futures fell $1.24 to settle at $100.91.

NYMEX futures also moved into backwardation, meaning the front month trades higher than the forward month, which could discourage refiners from building inventories.

Similar to Thursday's trading, which saw NYMEX futures drop more than $3/bbl, Friday's session opened with prices sharply down and August hit a low of $93.12, down $2.02, before trimming losses.

China had reported that June factory output fell to a nine-month low, while US manufacturing posted its worst quarter in the past year. Bu the big concern for oil futures remains the end of the Fed's $85bn/month (€65bn/month) economic stimulus programme that Chairman Ben Bernanke said Wednesday would be scaled back as the US economy continues to improve.

While crude futures were once more down sharply, the US stock market seemed to have shaken off the Fed news. It was down only about 30 points when crude trading closed for the week, while Treasury notes pushed their yield to a two-year high of 2.516% on Friday.  

($1 = €0.76)

By: Mark Yost
+1 713 525 2653

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