Did you honestly believe that oil prices would now continue on rising? Well, that doesn't seem to be happening and everyone is still wondering why...
Oil fell more than 10%, dipping below $33 a barrel on Tuesday after Russia and Ukraine agreed a gas deal that would help secure Europe's supply, while gloomy economic news presaged weaker demand for oil products.
Russia and Ukraine are both ready to fully resume transit of Russian gas to Europe, they said. This meant that there would no longer be an increased need for oil products to replace gas.
At 6:15 a.m. ET, U.S. light crude for February delivery was $2.78 lower at $33.73 a barrel, having previously hit a new 2009 low of $32.70. There was no official settlement on Monday due to a U.S. holiday.
The March contract, which takes over as front month on Wednesday, was down $2.74 to $39.83, and was more than $6.00 a barrel above the February contract due to brimming crude stocks at Cushing, Oklahoma, the delivery point for NYMEX contracts.
"The weak (U.S.) contract is due in part to the Russian gas deal and the effect the gloomy economic picture has on demand. Weak sterling is also having an impact," said Christopher Bellew of Bache Financial.
Economic uncertainty deepened after the Royal Bank of Scotland posted the biggest loss in the UK's corporate history, with stock markets in Asia following European counterparts lower and Japan's Nikkei index closing down 2.31%.
Oil prices were also put under pressure by foreign exchange factors on Tuesday as the pound plunged to a seven-year low against the dollar on banking sector woes.
The United States was closed on Monday for the Martin Luther King holiday, and trade was thin, especially on the front-month February contract.
