Oil dropped 10 percent as the Dow Jones Industrial Average slipped below 7,000 for the first time after Warren Buffett said the economy is in shambles” and insurer American International Group Inc. reported a $61.7 billion loss. U.S. manufacturing output in February shrank for a 13th consecutive month.
Crude oil for April delivery fell $4.39 to $40.37 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures dropped as much as $4.92, the most since Jan. 7. Prices are down 9.5 percent so far this year.
Brent crude oil for April settlement declined $4.08, or 8.8 percent, to $42.27 a barrel on London’s ICE Futures Europe exchange. The discount of oil in New York to the Brent grade in London widened to $1.90 a barrel. That’s still down from $10.67 on Feb. 12.
Oil also declined as the dollar strengthened to the highest level since April 2006 against the currencies of six major U.S. trading partners, reducing the appeal of commodities as an alternative investment.
The Dollar Index, which the ICE exchange uses to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, climbed to 88.969.
Officials from the Organization of Petroleum Exporting Countries, the supplier of 40 percent of the world’s oil, gave conflicting signals on their intentions to further cut output to bolster prices when they meet in Vienna on March 15.
The group will likely” reduce supplies to support prices when, Algerian Oil Minister Chakib Khelil said in an interview in Madrid today. Yesterday, Iran’s oil minister said OPEC is unlikely to lower crude production when it meets.
OPEC members have reached almost 100 percent compliance with existing cuts at the end of February, Khelil said. The group has implemented as much as 80 percent of previously announced supply cuts, preventing a sharp fall in the oil price, Iranian Oil Minister Gholamhossein Nozari said in comments posted yesterday on the Web site of state-run Iranian Students News Agency.