Oil Falls Near Eight-Week Low

Source: Bloomberg, Margot Habiby  (1/25/11)

"Crude has dropped for six days since settling at a 27-month high."


Crude oil fell to its lowest level in almost eight weeks on signals that the economies of the U.S. and the U.K. are struggling to recover.

Oil tumbled as much as 1.8% as U.S. residential real estate prices declined by the most in a year in November in a S&P/Case Shiller report and U.K. gross domestic product unexpectedly shrank in the fourth quarter. Crude has dropped for six days since settling at a 27-month high of $91.86 on Jan. 12.

"The unexpected contraction of the U.K. GDP is the big news today," said Tom Bentz, a broker with BNP Paribas Commodity Futures in New York. The U.S. housing number "is another bearish signal on top of a market that's already under pressure."

Oil for March delivery declined $1.32, or 1.5%, to $86.55 a barrel at 11:24 a.m. on the New York Mercantile Exchange. Earlier, it touched $86.30, the lowest price since Dec. 2. Futures are down 5.3% this month and have risen 15% in the past year.

The S&P/Case Shiller index of home values in 20 U.S. cities fell 1.6% from November the prior year, the biggest 12-month decrease since December 2009, the group said today in New York.

Britain's economy contracted the most in more than a year as construction slumped and the coldest December in a century hampered services and retailing. GDP fell 0.5% after increasing 0.7% in the previous quarter, the Office for National Statistics said in London today.

The median forecast in a Bloomberg survey of 33 economists was for an increase of 0.5%.

Brent crude for March settlement slid $1.07, or 1.1%, to $95.54 a barrel on the London-based ICE Futures Europe exchange.