Gasoline sank to a four-week low after European Central Bank President Mario Draghi said the region’s economic weakness will persist, reducing fuel demand, and as U.S. budget talks are stalled.
Futures fell as Draghi said the ECB forecast the euro area economy will shrink 0.5 percent this year, more than the 0.4 percent contraction predicted in September. President Barack Obama and Republican leaders are at a stalemate in negotiations to avoid the so-called fiscal cliff of automatic tax increases and spending cuts scheduled for January.
“Draghi’s comments make the market concerned that any significant amount of growth is not returning for a substantial period of time, which of course impacts demand,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “His concern also about the U.S. economy shows the extent to which the world is worried about the fiscal cliff.”
Gasoline for January delivery fell 4.19 cents, or 1.6 percent, to $2.5959 a gallon at 1:53 p.m. on the New York Mercantile Exchange. Prices touched $2.5893, the lowest intraday level since Nov. 8.
The ECB cut its 2013 forecast to a contraction of 0.3 percent from 0.5 percent growth.
Gasoline’s loss was part of a broader market decline as the dollar strengthened, making commodities less attractive to investors. The Standard & Poor’s GSCI Spot Index of 24 materials sank 1.4 percent at 1:52 p.m. in New York. The dollar surged 0.9 percent against the euro.
“The euro is getting crushed a bit,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “ This is a Draghi drop, no doubt about it. Some of the traders are a little distressed with the comments by Draghi.”
More than $600 billion in tax increases and spending cuts will start taking effect in January. Obama, a Democrat, said in a Bloomberg Television interview on Dec. 4 that the stalemate will continue as long as Republicans refuse to raise marginal income tax rates on the top 2 percent of earners.
Today’s loss follows a 1.9 percent slide yesterday after the Energy Department reported that inventories of the motor fuel rose the most last week since the terrorist attacks on the World Trade Center in New York.
“It’s a little hard to be optimistic about the market with big builds in inventories,” Flynn said.
January-delivery heating oil fell 5.33 cents, or 1.8 percent, to $2.9374 a gallon on the exchange. Prices touched $2.9347, the lowest intraday level since Nov. 5.
The average nationwide cost for regular gasoline fell 0.1 cent to a $3.379 a gallon, AAA said today on its website. That’s the lowest level since July 6. The pump price reached a 2012 high of $3.936 on April 4.