Oil prices plummet after jobless claims

By Chavon Sutton, staff reporter


NEW YORK (CNNMoney.com) -- Oil prices fell Thursday for the second straight day amid growing concerns over demand and fiscal stability in Europe.

What prices are doing: Crude prices for May delivery fell $1 dollar to $84.89 a barrel. Prices reached $86.62 this week, flirting with near 18-month highs.

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For more commodities prices, click chart.

What's moving the market: Oil prices retreated, amid growing concerns over demand and a strengthening dollar.

On Wednesday, separate reports from the U.S. Energy Information Administration and American Petroleum Institute showed mixed inventory results. The results were in line with analyst expectations, but traders reacted to the bigger-than-expected build in crude supplies reported by EIA.

Rising inventories implies lower demand. Coupled with looming worries about European fiscal stability, which bolstered the dollar, the inventory reports helped push oil prices down.

A stronger dollar tends to make crude oil, which is priced in the greenback, more expensive for foreigners. This in turn pushes down demand and prices.

Also, a report from the Labor Department on Thursday said initial claims unexpectedly soared in the week ended April 3, fueling demand fears.

What analysts are saying:"Demand for oil still reflects a constricted economy," said Mike Fitzpatrick, vice president of energy for MF Global. "It's surprising that we even reached the highs that we did."

In a separate research note on Thursday, MF Global analyst Tom Pawlicki said that the dollar traded higher based on continued worries over Greek debt and from disappointing eurozone economic data.

Pawlicki also said that Wednesday's conflicting comments on interest rates from Fed chairman Ben Bernanke and Kansas City Fed President Thomas Hoenig are spooking the markets.

Bernanke expressed concern over the sustainability of the economic recovery, given the precarious state of the jobs and housing markets. And Hoenig implied that an increase in the fed funds rate would still be "accommodative."

Calling the recovery fragile at best, Fitzpatrick said that oil prices could be under pressure for the remainder of the quarter.

"We've seen signs of a recovery, but we need to see for sure that the recovery has taken hold and is sustainable," he said.  To top of page

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