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Oil down as dollar rises, Brent close to $100

Oil down as dollar rises, Brent close to $100
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First Published: Mon, Jan 17 2011. 03 34 PM IST
Updated: Mon, Jan 17 2011. 03 34 PM IST
London: Oil slipped on Monday as the dollar strengthened and equities faltered while US markets closed for the Martin Luther King public holiday.
North Sea Brent crude futures on the Intercontinental Exchange (ICE) consolidated around $6 above US crude oil futures and were not far below $100 per barrel, a level not seen since the beginning of October 2008.
US crude for February fell 65 cents to $90.89 by 0900 GMT, while ICE Brent for March lost 50 cents to $97.88.
The spread between the two futures contracts has narrowed since the ICE Brent contract for February expired on Friday. At one point on Friday, the spread between the two February contracts hit more than $8.00 a barrel, its widest in 23 months.
Traders said the US public holiday was likely to help keep oil futures within fairly narrow ranges on Monday.
Christopher Bellew, at broker Bache Commodities, said the stronger dollar had put pressure on commodities markets:
“The oil price has been in an uptrend since the middle of November and now we are getting close to $100. The weather in the northern hemisphere has turned a bit milder, and the end of winter is in sight. It’s either pausing or going to retrace,” Bellew said.
The S&P 500 index of US companies ended a seventh straight week of gains on Friday with a bank-led rally amid healthy volume after encouraging financial results from JPMorgan.
But Asian shares mostly fell on Monday, led by a drop in Shanghai in the wake of China’s latest attempt to contain inflation.
The benchmark Shanghai Composite Index closed down more than 3%. The index lost 1.7% last week amid fears over monetary tightening steps.
European shares edged higher early on Monday as investors awaited to see if euro zone officials would raise the euro zone bloc’s safety fund. The euro eased as the dollar rose against a basket of currencies.
A weaker dollar tends to support dollar-denominated commodities such as oil, making them cheaper for holders of other currencies.
The head of the International Energy Agency, Nobua Tanaka, said on Monday oil prices were alarming at current levels and would have a negative impact.
But the UAE’s oil minister, said fluctuating prices were not a worry: “The price keeps going up and down and all I can say for now is that we are happy,” Mohammed al-Hamli told reporters.
Al Hamli said markets were well supplied and prices reflected market conditions.
Secretary general Abdullah al-Badri told an Austrian newspaper that while Opec was ready to act to address supply shortages in the oil market, it would not intervene if prices were driven by speculation..
At this stage, higher output would not stem a rise in oil prices, as the climb is driven by increasing demand in emerging countries, chief executive of French oil major Total Christophe de Margerie told Reuters on Sunday.
Opec will release its monthly oil market report later on Monday with attention focusing on global demand, supply forecasts and inventory data.
Speculators increased their net long crude oil futures positions in the week through 11 January, the Commodity. Futures Trading Commission (CFTC) said on Friday.
Money managers, the group containing hedge funds and other speculative investors, raised their net long positions to 195,655 from 175,862 positions in the previous week.
In Alaska, the operator of the Trans Alaska Pipeline System, which has been struggling for the past week with a leak in piping at the Prudhoe Bay intake station, said the oil artery would resume normal operations late on Sunday or early Monday.
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First Published: Mon, Jan 17 2011. 03 34 PM IST
More Topics: Markets | Oil | US | Opec | Dollar |