Oil falls on U.S., German economic concerns

By Matthew Robinson

NEW YORK (BestGrowthStock) – Oil prices dropped nearly 2 percent to below $79 a barrel on Tuesday, breaking a five-day rally, as a fall in U.S. consumer confidence and German business sentiment sent investors into safer havens, such as the dollar.

U.S. crude futures for April settled $1.45, or 1.81 percent, lower at $78.86 a barrel. The March contract, which expired on Monday, hit $80.51 during its last day of trading, the highest price for a front-month contract since January 13.

In London, Brent crude fell $1.36 to settle at $77.25 a barrel.

U.S. consumer confidence fell in February to the lowest level in 10 months as consumers’ short-term outlook for the jobs market worsened, according to a report by the Conference Board, an industry group.

German business sentiment fell for the first time in almost a year in February, suggesting a harsh winter may send Europe’s largest economy sliding back into contraction in the first quarter.

The dollar accelerated gains against the euro after markets, already keyed up for testimony from the U.S. Federal Reserve chief later this week, saw sinking U.S. consumer confidence as a red light for risk.

Caution ahead of testimony from Federal Reserve Chairman Ben Bernanke on Wednesday also cut demand for risk. Bernanke will give his semiannual testimony on monetary policy and the state of the economy before the House Financial Services Committee.

“The overarching, unavoidable, inescapable fact is that consumers are still reeling from the effects of the greatest economic calamity of most of their lifetimes,” Mike Fitzpatrick, vice president at MF Global in New York, said in a research note.

“They have been forced to deleverage in the face of possible job loss and foreclosure. Until they begin to return to work, economic growth is going to be grindingly slow and so will energy demand growth.”

The market was awaiting U.S. oil stocks data due later on Tuesday and on Wednesday morning. An updated Reuters poll of analysts forecast the data will show a rise of 2.0 million barrels in crude oil inventories last week, the fourth weekly rise in a row as imports continued to increase.

Gasoline stockpiles were seen rising 400,000 barrels in the week to February 19, while distillate inventories were forecast to have fallen by 1.6 million barrels.

The American Petroleum Institute, an industry group, was due to release its weekly oil data for the week to February 19 at 4:30 p.m. EST (2130 GMT) on Tuesday, with data from the U.S. Energy Information Administration due on Wednesday at 10:30 a.m. EST (1530 GMT).

Further easing came on signs a strike by French refiners could come to an end. French energy giant Total (TOTF.PA: ) pledged not to close or sell any refineries in the European country, other than its Dunkirk plant, for five years, which unions say clears the way to end a strike that has embarrassed the government ahead of regional polls.

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(Reporting by Gene Ramos, Robert Gibbons and Matthew Robinson in New York; Ikuko Kurahone and Christopher Johnson in London and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy)

Oil falls on U.S., German economic concerns