Oil falls below $74 as stocks retreat
LONDON — Oil prices fell below $74 Tuesday in Europe, taking a cue from weak stock markets and expectations the end of the summer driving season in the U.S. will sap already weak demand.
Benchmark crude for October delivery was down 53 cents to $73.84 a barrel by late morning European time in electronic trading on the New York Mercantile Exchange.
Nearly all world stock markets were lower Tuesday, providing a negative lead for the oil market, which often looks to the performance of equities as a gauge of economic optimism and therefore crude demand.
Oil approached $75 a barrel Monday for the first time in 10 months amid optimism that the world’s economies are on the mend, but fell back to settle at $74.37, up 48 cents on the day.
Expectations that demand for energy will grow, at least for oil and gasoline, were spurred by Federal Reserve Chairman Ben Bernanke, who said Friday the recession-hit U.S. economy is reviving. Bernanke’s remarks and signs of improvement in the U.S. housing market sent stock markets higher, with some momentum carrying over into the new week.
Despite the optimism about recovery from recession, analysts say energy demand remains in the doldrums and seasonally lower demand for gasoline as the summer holidays end will exacerbate that weakness.
“Oil at the $70-plus level remain potentially vulnerable because there is little constructive fundamental support, inventories are high and global demand remains weak,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
“In my view, oil prices will likely give in to the fundamentals in the coming week. Seasonally, oil demand is lower in autumn, so reduced demand in the shoulder season may put further pressure on oil.”
In other Nymex trading, gasoline for September delivery fell 0.15 cents to $2.03 a gallon and heating oil was down 1.67 cents to $1.9124 a gallon. Natural gas fell 2.1 cents to $2.948 per 1,000 cubic feet.
In London, Brent crude was down 64 cents at $73.62.
Associated Press writer Eileen Ng in Kuala Lumpur contributed to this report.
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