Oil Adds To Losses As Fiscal Cliff Nears
Benchmark U.S. oil futures on Monday slightly extended their losses in electronic trade but with markets quiet ahead of Christmas holidays.
West Texas Intermediate crude oil for February delivery slipped 14 cents, or 0.2%, to $88.52 a barrel during Asian trading hours, adding to a 1.6% drop in Friday’s regular New York Mercantile Exchange session.
Friday’s losses for oil came after a botched attempt by House Republicans to pass a “Plan B” bill for averting fiscal-cliff tax hikes. The failed effort appeared to lower the prospects for a bipartisan deal to protect the U.S. economy from the austerity measures slated to take effect at the start of the year. Read: Oil drops below $89, but notches weekly win
On Saturday, the top Republican negotiator on the fiscal cliff, House Speaker John Boehner, said he’s ready to return to talks with the White House. Read: Boehner holds out hope for fiscal cliff deal
However, the markets seemed to take little cheer from the current situation on the fiscal cliff, as U.S. stock-index futures traded lower, with Dow Jones Industrial Average futures down 0.4%, and those for the S&P 500 lower by 0.5%.
Subject of discussion
The fiscal cliff has become a central focus for investors in a wide variety of assets, including oil futures, Citi Futures analysts wrote Friday that any solution to the cliff is unlikely to affect the actual supply-and-demand dynamics in the U.S. energy market.
“We don’t think a fiscal deal would put physical petroleum demand on a much different path, [and] the price reaction has far more to do with investor appetite for risk than actual oil consumption in our view,” they wrote.
A slightly stronger U.S. dollar Monday also added pressure to oil, with the ICE dollar index rising to 79.601 from its 79.575 level late Friday. Appreciation in the U.S. currency tends to make dollar-denominated more expensive and therefore less attractive to holders of other currencies.
Natural-gas futures also moved lower Monday, as January natural gas eased 3 cents, or 0.8%, to $3.42 per million British thermal units.
Other energy futures saw less movement, as January gasoline sat little changed at $2.74 a gallon and January heating oil traded flat at $3.02 a gallon
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