US Light oil price trading around $79, concerns over US economy

US Light oil price fell to just above $79 a barrel in trading on Friday and was set for its first weekly drop in more than a month on disappointing US economic data. US retail sales declined in December for the first time in three months, the Commerce Department said on Thursday, while Labor Department data showed more people sought jobless benefits last week.

US crude oil futures for February delivery slid 37 cents to $79.02 a barrel on the NYMEx, while in London Brent crude oil futures slid 47 cents to $78.10. Oil prices, which have fallen every day this week, have shed about $5 from a intraday high of $83.95 on Monday, and touched a 2010 low of $78.37 two days ago.

“The fundamentals are weak,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. “U.S. economic data is not really improving much and this may push down NYMEX prices to below $78.”

Prices edged up briefly a day earlier, after US regulators announced proposals to cap the size of positions dealers can hold, aiming to limit speculation, but traders considered the step to be not as stringent as feared. The long awaited proposals from the US Commodity Futures Trading Commission (CFTC) will apply to the four most-traded energy contracts on the two major exchanges, NYMEX and ICE.

It remains to be seen if the limits, which the CFTC said would affect only the 10 biggest position holders if implemented immediately are enough to satisfy Congress members who have clamored for regulatory action since oil prices jumped to a record above $147 in July 2008. Emori said it was too early to say whether the new regulation would affect the market or prices.

“We probably need some more details on how they will regulate each category of participants,” he said. “It is quite difficult for them to distinguish which part of a bank’s trading activity is hedging or speculation.”

Tags:  light, NYMEX, oil price, trading, US economy