Heating oil back below $2 a gallon

1 June 2010

Written by John King

Heating oil prices fell back below $2 a gallon ($1.63) a gallon in electronic trading on the New York Mercantile Exchange this morning (June 1st), tracking losses in crude futures.

Oil commodities were under pressure after official Purchasing Managers' Index (PMI) figures showed a decline in industrial output in China last month, while factory hiring is also slowing.

The new data heightened concern that demand for fuels may be weakened in the coming weeks as industrial growth cools.

Commenting on the slump in crude prices seen this morning, Ken Hasegawa, a commodity derivative sales manager at Newedge in Tokyo, told Bloomberg: "After the sharp rebound from $65, a lot of selling interest is coming into the market. China's PMI has declined. It's very hard for the market to go higher under these circumstances."

In electronic trading, crude oil lost as much as $1.57 to trade at $72.40 a barrel.

Analysts said the rising value of the dollar in foreign exchange markets also dampened appetite for crude and other fuels that are priced in dollars.