Published: Friday January 28, 2011 MYT 8:24:00 AM

Oil price falls below US$86

NEW YORK: Oil prices fell Thursday on a batch of disappointing economic news.

Benchmark oil for March delivery lost $1.69 to settle at $85.64 a barrel on the New York
Mercantile Exchange.

The Commerce Department said durable goods orders, excluding transportation, rose just 0.5
percent last month following a much stronger 4.5 percent November increase. Yet overall
demand for durables fell for a second straight month. Durable goods are factory products
expected to be used for at least three years, like appliances.

In addition, the Labor Department said the number of Americans applying for unemployment
benefits rose last week.

The possibility China may raise interest rates or take other tightening measures before Lunar
New Year holidays begin next week also kept a lid on oil prices.

"There is still a strong probability that China's central bank will raise interest rates or increase
reserve requirements again to cool economic growth there," energy consultants Cameron
Hanover said in a report.

Adding to the caution, the Energy Department said U.S. stockpiles of oil and gasoline rose
more than expected last week.

Crude supplies expanded by 4.8 million barrels to 340.6 million barrels. Gasoline supplies
rose by 2.4 million barrels to 230.1 million barrels, while demand in the past four weeks
increased 1.1 percent. Supplies of distillate fuel, which includes diesel and heating oil,
declined by 100,000 barrels to 165.7 million barrels.

"Prices will likely remain within a $80-$95 trading range ... with the downside bias becoming
more noticeable during the beginning of the second quarter when crude enters it seasonally
weaker period," said senior commodity analyst Edward Meir at MF Global in New York.

In other Nymex contracts for February contracts, heating oil lost 1.62 cents to settle at
$2.6551 a gallon and gasoline gave up 4.34 cents to settle at $2.4132 a gallon.

Natural gas futures for March gave up 18.2 cents, or 4 percent, to settle at $4.319 per 1,000
cubic feet. Natural gas prices fell as winter headed into its final months with plenty of gas still
on hand across the country. The winter has been colder than normal in many parts of the U.S.,
but some forecasts see temperatures moderating around mid-February. That has created some
uncertainty about how much more natural gas will be used before spring and warmer weather
arrive.

In London, Brent crude lost 52 cents to settle at $97.39 a barrel on the ICE Futures exchange.
- AP