Crude Prices Drop
Below $70 on Yuan Moves
By MASOOD FARIVAR
May 16, 2006; Page C6
NEW YORK -- Oil prices fell below $70 a barrel as a move by China to allow its currency to appreciate helped send energy and other commodities markets tumbling.
China set a key trading benchmark for the yuan under 8.0 to the dollar for the first time, in effect allowing its currency to appreciate more rapidly.
The move was seen as largely symbolic, but analysts said it could make Chinese exports of goods more expensive, which could result in a reining in of the country's manufacturing sector and a curbing of demand for raw materials.
The Chinese central bank's announcement was "the major force behind the selloff" in commodity markets, said Phil Flynn, an energy analyst at brokerage firm Alaron Trading Corp. in Chicago. "It could slow Chinese demand for commodities" at a time when rising oil prices are cutting into world energy consumption.
The June crude contract on the New York Mercantile Exchange closed $2.63 lower, or 3.7%, to $69.41 a barrel.
The June gasoline contract slid 12.45 cents, or 5.7%, to $2.0540 a gallon. The June heating-oil contract dropped 10.17 cents, or 5%, to $1.9450 a gallon.
The Chinese announcement came at a time when oil prices were already falling in response to a recent slowdown in demand and rising supply.
Demand concerns surfaced last week after the International Energy Agency, the energy watchdog for the world's most developed nations, slashed its 2006 oil-demand-growth expectations in response to rising prices. |
