Oil Falls Again
Published on Tuesday, 28 February 2012 17:53 Written by Todd Shriber
New York, February 28th (TradersHuddle.com) – Oil’s losing streak now stands at two days as demand erosion concerns on the back of high prices prompted more selling in the oil pits today though some traders believe Tuesday’s downdraft for oil was nothing more than some profit-taking. Either way, NYMEX-traded crude for April deliver fell $2.01 to close at $106.55 a barrel. In London, Brent for April deliver dropped $2.62 to finish the day at $121.55 a barrel. The contracts are on pace for February gains of 8% and 9%, respectively.
Today, OPEC member Iran, which has been roiling the oil market with threats to cut off supply to Europe said it will keep discussing its nuclear program with the U.N.'s International Atomic Energy Agency. Drivers are now paying an average of $3.72 a gallon nationwide after gas prices increased for a 21st consecutive day on Tuesday, the Associated Press reported. Alaska, California, New York, Connecticut and Hawaii have the highest gas prices in the U.S.
Despite the Dow Jones Industrial Average closing above 13,000 for the first time in almost four years, Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX) both closed fractionally lower on the day. BP (NYSE: BP), Europe’s second-largest oil company, closed higher after the company announced it will sell its Kansas natural gas assets to Linn Energy (NASDAQ: LINE) for $1.2 billion.
The deal is part of BP’s previously announced asset sales program to raise cash for expenses related to the Gulf of Mexico oil spill. The assets include all of BP’s interests in 2,400 natural gas wells in the Hugoton Field, in southwest Kansas, according to the Wall Street Journal.
In other BP news, the company is looking to settle with spill plaintiffs using $14 billion from the Gulf Coast Claims Facility, which was used to compensate business owners who lost money immediately following the worst oil spill in U.S. history. A settlement, while advantageous for BP, would undoubtedly be complex and the Justice Department has signaled it’s prepared to go to trial against the British oil giant.
BP rival Royal Dutch Shell (NYSE: RDS-A), Europe’s largest oil company, finished higher on the day despite news the company could see a competing bid from Indian suitors to its $1.6 billion for Cove Energy. Shell announced the takeover, aimed at bolstering the company’s production of liquefied natural gas, last week. A Thai company has already offered $1.8 billion for Cove.
As measured by the Market Vectors Oil Services ETF (NYSE: OIH) and the SPDR S&P Oil & Gas Equipment & Services ETF (NYSE: XES), oil services issues were mostly negative on the day. Both funds are up over 13% year-to-date.
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