Oil dips on consumer confidence drop

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- Oil fell below $79 a barrel Tuesday, retreating from a five-day rally on a stronger dollar.

What prices are doing: Crude oil for April delivery dropped $1.27, or 1.6%, to $79.04 a barrel on Tuesday.

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Click on the chart to view oil prices.

On Monday, oil advanced as the dollar lost ground versus major currencies.

What's driving prices: A report from the Conference Board showed that the Consumer Confidence index fell sharply in February to 46 from 56.5 in the previous month.

Economists surveyed by Briefing.com expected the index to decline slightly to a reading of 55.

"When you get a shocking drop in consumer confidence like that, it does raise questions about the sustainability of the economic recovery," said Phil Flynn, a senior market analyst at PFG Best.

And a healthy economy requires more oil to operate -- whether for vehicles or in manufacturing.

Oil prices were also pressured by a stronger dollar, which advanced against the euro and the U.K. pound. Oil and other commodities that are priced in dollars often fall when the U.S. currency strengthens.

What analysts are saying: "Oil prices are in a choppy trading range and are ultimately going to go lower," said Flynn. "We're lower than where we were when we started the year and lower than where we were last month -- it's going to be a long, arduous ride but we'll keep going lower."

In the next few weeks, Flynn said prices may stay in a trading range of $70 to $80 a barrel, but prices could fall as low as $40 a barrel by the end of the year, as warmer weather reduces demand for oil. To top of page

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