Oil futures fell Tuesday on mounting concerns that the U.S. economy may be heading toward a recession that would dampen demand for crude...
NEW YORK — Oil futures fell Tuesday on mounting concerns that the U.S. economy may be heading toward a recession that would dampen demand for crude.
While the Federal Reserve’s interest-rate cut helped crude futures recover from much steeper earlier losses, many investors doubt the move will stave off a serious slowdown.
“Whenever you see a rate cut of that magnitude between (Fed) meetings … it conjures up images of desperation,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
Light, sweet crude for February delivery fell 72 cents to settle at $89.85 a barrel on the New York Mercantile Exchange; earlier, prices had fallen as low as $86.11. Oil last traded that low on Dec. 6. The February contract expired at the close of trading. March crude fell 71 cents to settle at $89.21 a barrel.
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The Nymex and other financial markets in the U.S. were closed Monday for the Martin Luther King Jr. holiday. Oil futures recovered from earlier losses because the Fed move appeared to stabilize stocks, analysts said.
“I think the oil market is now attached to the hip of the equity markets,” Ritterbusch said.
Indeed, energy investors often view stocks as a proxy for economic growth, and slower economic growth could certainly cut demand for oil and petroleum products such as gasoline and heating oil.
“We have long argued that a marked deterioration in the U.S. economy — or a perception of one — was the ‘Achilles’ heel’ that could badly puncture the bull move in the commodity markets,” said Edward Meir, an analyst at MF Global UK, in a research note.
High energy prices also have been cited as a force pushing the economy toward recession. If oil prices continue to fall, as many analysts now expect, that could relieve some pressure on the economy.
At the pump, gas prices have mostly fallen in recent weeks after rising sharply earlier in the month as oil set a record above $100 a barrel.
Overnight, the average national price of a gallon of gas held steady at $3.01 a gallon, according to AAA and the Oil Price Information Service. But prices have fallen 2.3 cents a gallon since Friday.
Other energy futures mostly fell Tuesday. February heating- oil futures dropped 3.48 cents to settle at $2.4726 a gallon on the Nymex, while February gasoline futures fell 2.28 cents to settle at $2.2806 a gallon.