Singapore: World oil prices fell Tuesday in a market preoccupied with the fate of the United States economy, dealers said.
They said economic worries overwhelmed weather-related supply concerns at a key US shipping channel.
In morning trade, New York’s main contract, light sweet crude for delivery in March, fell 22 cents to $89.80 per barrel.
The contract closed $1.06 higher at $90.02 a barrel on Monday during floor trading at the New York Mercantile Exchange.
Brent North Sea crude for March delivery fell 12 cents to $90.35 a barrel, after settling $1.03 higher at $90.47 on Monday in London.
Monday’s rise in crude prices came partly on supply concerns after fog forced the shutdown of a shipping channel serving a Texas port.
Forty oil tankers were backed up, waiting for the dense fog to lift before trying to enter the channel, which leads to the top US oil port, analysts said.
But they said the incident would only affect prices temporarily.
“The news might have been supportive of pricing but it will not last,” said Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore.
He said crude futures have recently been moving in line with equities markets and will continue to do so “as concerns about the US economy continue to weigh on the market.”
Shum added that recent geopolitical and supply concerns are not now the main determinants of crude oil prices because of uncertainty over the US economy.
Oil prices initially dropped on Monday, extending heavy pre-weekend losses as concerns grow about weakness in the economy and a drop in demand for oil that would likely result. The US is the world’s biggest energy consumer.
Some analysts see a recession looming in the US.
Since striking a high above $100 at the start of the year, New York oil prices have slid owing to fears of a US recession and a global economic slowdown.
But crude futures are still almost double the level of a year ago.
Seasonal changes are also expected to put downward pressure on crude oil prices, Shum said, with decreasing demand in the next few weeks as the Northern hemisphere winter ends.
“We will see further softening in prices as we enter the lull in between the cold season and the peak holiday season,” said Shum.