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Oil Settles Lower with Debt Woes Demand in Spotlight


Oil futures settled lower Thursday, as uncertainties surrounding oil’s demand outlook and debt woes in the U.S. and U.K. pressured oil into giving back nearly all of the previous session’s Federal Reserve-induced gains.

Oil for January delivery fell 88 cents, or 1%, to settle at $85.89 a barrel on the New York Mercantile Exchange, trading between $85.81 and $86.97.

The move followed the contract’s 1.1% advance Wednesday, when the contract touched a high of $87.68.

Oil market “sentiment was hurt,” said Fawad Razaqzada, technical analyst at GFT Markets, after U.S. House Speaker John Boehner reiterated that serious concerns remained about the fiscal cliff, and as Standard & Poor’s Ratings Services cut its outlook on the U.K.’s credit rating to negative.

The Fed’s latest round of intervention has also “so far failed to stimulate the markets in the way many had hoped it would but the move was, after all, expected,” said Razaqzada, in emailed comments.

The gains Wednesday had come amid some bullish influences: The Federal Reserve unveiled its latest bond-buying program and surprised markets by setting thresholds for unemployment and inflation that must be in place before the central bank will raise rates.

Debt woes mount

U.S. House Speaker John Boehner pressed the White House Thursday for spending-cut proposals. His comments indicated that significant differences remain between the Republicans and Democrats over crafting a deal to avert the fiscal cliff, the series of tax hikes and spending cuts that start next year.

Also putting pressure on oil, Standard & Poor’s Ratings Services on Thursday cut its outlook on the U.K.’s credit rating to negative from stable, warning that the country could lose its AAA status within two years.

Meanwhile, U.S. economic data was a little “distracting” for crude, said Matt Smith, a commodity analyst at Schneider Electric, a Louisville, Ky.-based global specialist in energy management.

The Commerce Department reported that retail sales rose 0.3% last month after declining 0.3% in October, but sales at gasoline stations fell by 4% in November — the biggest one-month decline since December 2008.

Wholesale prices, meanwhile, fell sharply, with the producer price index down a seasonally adjusted 0.8% last month.

Initial jobless claims fell by 29,000 to a seasonally adjusted 343,000 in the week ended Dec. 8. Economists polled by MarketWatch forecast a fall to 370,000.

For oil, “until we have further resolution on the fiscal-cliff front, we are likely to tread water around current levels, with fundamentals and uncertainty weighing on prices, while the hope of progress regarding the fiscal cliff backstops any significant bout of selling,” said Smith.

Wednesday’s weaker dollar had helped dollar-denominated oil prices, but the greenback strengthened a bit Thursday, with the ICE dollar index edging up to 79.932, from 79.858 late Wednesday in North America.

Natural-gas inventories unexpectedly climbed the week ended Dec. 7.

Elsewhere in the energy complex, January gasoline closed down 4 cents, or 1.7%, at $2.60 a gallon, while January heating oil ended down 2 cents, or 0.8%, at $2.94 per gallon.

Natural gas for January delivery eased 4 cents, or 1%, to $3.35 per million British thermal units.

Source: Marketwatch.com