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Oil falls to $80 on firm dollar, Greece debt worries

Oil falls to $80 on firm dollar, Greece debt worries
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First Published: Mon, Mar 22 2010. 01 16 PM IST
Updated: Mon, Mar 22 2010. 01 16 PM IST
Singapore: Oil fell towards $80 on Monday as a firmer dollar, nagging worries over Greece’s debt and a surprise interest rate hike by India at the end of last week stoked concern over demand.
However, fears of global oversupply are countered by a decline in China’s fuel exports in February, implying oil demand may gain on an expected domestic demand jump as factories in the country ramp up work previously stalled by winter weather.
US crude for April delivery, which expires later on Monday, slid for the third-straight session, down 62 cents to $80.07 a barrel at 12:06pm.
It had settled at $80.68 on Friday, which saw its worst percentage loss since Feb. 25, and also marked two consecutive weeks of falls.
London Brent crude for April fell 52 cents to $79.36 a barrel.
This month, oil has managed to top $83 four times, but has failed to hold the gains, partly stemming from expectations of oversupply this year.
A Reuters poll of 10 oil-tracking analysts and organisations showed the oil market will likely face oversupply of 150,000 barrels per day (bpd).
“The overall market fundamentals are still not tight. These, combined with the recent strengthening of the US dollar in the last few months, have been one of the reasons why oil is unable to extend its rally,” said Toby Hassall of CWA Global Markets in Sydney.
“We just have not seen enough fundamentals to justify a further increase in the price. We are still seeing oversupply in Europe and the US,” he added.
The US dollar index, measured against a basket of currencies, was up 0.21% to around 80.89, above last week’s 79.825 low. The index had rallied 1.4% late last week as the euro succumbed to fresh worries over Greece and its ability to fund itself without euro zone support.
The euro remained under pressure ahead of a euro zone summit, and was languishing at $1.3518, down from $1.3535 late in New York on Friday, when the single currency had fallen to its lowest in more than two weeks against the dollar.
EU leaders seemed at odds over how or whether to offer assistance to Greece setting the scene for a tense summit on 25-26 March.
Commodity-linked currencies and those leveraged to global growth such as the Australian and New Zealand dollars were still reeling from last week’s unexpected increase in Indian interest rates.
A firmer greenback makes oil, priced in dollars, more costly for foreign currency holders. It also indicates investors shifting away from assets deemed riskier, such as commodities and equities, and into safe-haven bets like US Treasury notes.
Gold also fell further on Monday as investors sold into a stronger US dollar.
India raised interest rates last Friday from record-lows for the first time since it began cutting in 2008, adding to the gloom, as investors feared the tightening move would curb consumption even as the market is looking to robust economic growth in India and China to lead fuel demand.
But China’s return to robust manufacturing activity after the slowdown during the cold winter and the Lunar New Year break, could still offer some hope to oil markets.
Implied oil demand in the world’s second-biggest energy user rose 19.4% in February over a year earlier, where it consumed 8.65 million barrels of oil per day, though real demand growth has been undercut by swelling stocks.
It also soaked up more gasoline, marked by a 28% fall in February exports against a year ago to 210,785 tonnes and in contrast with January’s 600,533 tonnes and a decade peak of almost 1 million tonnes in December.
Diesel exports slid by 11.8% last month from a year earlier to 290,000 tonnes. The drops turned China back into a net fuel importer after being a net exporter in both January and December.
Some support may also come from Mexico, where all three of its main oil-exporting ports on the Gulf of Mexico were shut on Sunday due to bad weather.
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First Published: Mon, Mar 22 2010. 01 16 PM IST
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