Oil dips on gloomy consumer sentiment

By Chavon Sutton, staff reporter

NEW YORK (CNNMoney.com) -- Oil prices fell Friday, as a preliminary consumer sentiment report came in worse than expected, overshadowing a rosy government retail sales report and a weaker dollar.

What prices are doing: Crude for April delivery dropped 87 cents to $81.24 a barrel after climbing above $83 earlier in the day.

For more commodities prices click the chart

What's moving the market: Positive retail sales and a weaker dollar weren't enough to keep oil prices above the $83 threshold for long.

The Commerce Department on Friday said that total retail sales edged up 0.3% in February, renewing optimism about the economy. Oil prices jumped to an intraday high of $83.16 a barrel.

The dollar index (DXY), which measures the greenback against a basket of other currencies, was down 0.64% to 79.81, also helped support oil. Because oil is priced in dollars, a weaker dollar makes it cheaper for foreigners to buy the commodity.

But a less than cheery preliminary reading of the University of Michigan Consumer Sentiment Index helped send oil prices down by as much as $1.54. The index slipped to 72.5 in March, from 73.6 in February, well below analyst estimates of 74.0, according to a survey by Briefing.com.

What analysts are saying: "Consumer sentiment sucked the life out of the market today," said Gianna Bern, president of Brookshire Advisory and Research, Inc., a Chicago-based investment research firm.

"Crude has gotten ahead of itself in the last couple weeks," said Bern. "An $81 a barrel [price] is very generous considering global demand is still fairly low." She added that crude inventories are still above their 5-year averages.

Still, higher demand forecasts this week from the U.S. Energy Information Administration and the International Energy Agency in Paris, as well as a better than expected jobless report, point toward improving economic conditions.

Analysts say the oil rally should continue, barring any surprising economic news with prices piercing a ceiling of about $85 a barrel as early as May.

Looking ahead, traders are keeping an eye on OPEC's semi-annual conference on March 17, where analysts expect oil quotas to remain unchanged. April crude contracts expire on March 22.

Gasoline prices: The national average for a gallon of regular unleaded gasoline rose to $2.783 on Friday, up from the previous day's price of $2.776, according to motorist group AAA.  To top of page

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