Oil falls $2 on Goldman fraud charges, dollar

By Robert Gibbons

NEW YORK (BestGrowthStock) – Oil prices fell 2.65 percent on Friday as news that the U.S. government charged Goldman Sachs (GS.N: ) with fraud over subprime-related financial products pushed markets lower.

The Securities and Exchange Commission lawsuit alleges that the investment bank, a trader with large positions across many markets including commodities, committed fraud in the structuring and marketing of collateralized debt obligations tied to subprime mortgages.

“The market is reacting to Goldman’s extensive trading positions across all asset classes and the threat that those markets will all be disrupted as an unintended consequence of this investigation,” said Joseph Arsenio, managing director at Arsenio Capital Management in Larkspur, California.

The dollar and yen advanced strongly on rising risk aversion after the Goldman reports and with persistent concern over Greece’s fiscal problems weighing on the euro.(USD/: )

“We started off mainly worrying about Greece again, the dollar got strong on reports they are going to the IMF this weekend. Going into another weekend of Greece issues probably pressured us early,” said Phil Flynn, analyst at PFGBest Research in Chicago.

U.S. stocks (Read more about the stock market today. ) fell after six days of higher finishes, led by bank shares and corporate earnings that did not meet expectations.(.N: )

U.S. crude for May delivery settled at $83.24 a barrel, falling $2.27, or 2.65 percent, the largest one-day percentage loss since February 5. Intraday on Friday, prices fell as low as $82.52.

The June Brent contract fell $1.60 to settle at $85.99 a barrel. The May London Brent crude oil contract reached 18-month highs before it expired on Thursday, jumping to a premium to the front-month U.S. crude contract of over $1.60.

The 19-commodity Reuters-Jefferies CRB index (.CRB: ) fell over 1 percent, backing away from Wednesday’s 12-week highs.

Adding to the pressure on oil early Friday was news that Thomson Reuters/University of Michigan’s Surveys of Consumers showed U.S. consumer sentiment took a negative turn in early April due to a grim outlook on income and jobs.

Also on Friday, the Senate Agriculture Committee’s draft bill to regulate the $450 trillion over-the-counter derivatives market was unveiled, taking a tougher tack against big banks than the Senate Banking Committee or House bills on the issue.

The bill would require banks to spin off swaps desks if they are protected by federal deposit insurance or access the Federal Reserve discount window.

The bill requires most swaps to trade on regulated exchanges and pass through clearinghouses. Commercial end users could claim exemptions from the requirements.

Traders also eyed comments from China’s President Hu, who said the world’s second largest oil consumer remains on course to gradually put in place a managed floating exchange rate system.

Stock Research

(Reporting by Matthew Robinson, Gene Ramos, Edward McAllister and Eileen Moustakis in New York; Joe Brock in London; Alejandro Barbajosa; Editing by Lisa Shumaker)

Oil falls $2 on Goldman fraud charges, dollar