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Oil rebounds from 2010 lows as dollar pares gains

Oil rebounds from 2010 lows as dollar pares gains
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First Published: Fri, Feb 05 2010. 11 14 AM IST
Updated: Fri, Feb 05 2010. 11 14 AM IST
Singapore: Oil edged up on Friday after its biggest one day fall since July the previous day, as intervention by the Swiss National Bank to buy euros pared dollar gains.
The dollar index, a measure of the greenback’s performance against six major currencies, had earlier touched its highest in seven months as concern deepened about worsening fiscal problems in south European countries.
But sentiment remains fragile ahead of key US non-farm payrolls number out later in the day, which could show unemployment continuing to rise in the world’s largest economy, especially after an unexpected increase in US jobless claims.
US crude oil for March delivery gained 24 cents to $73.38 a barrel at 10:53am. On Thursday it touched a 2010 intraday low of $72.42 and closed down 5%
London ICE Brent for March rose 8 cents to $72.21.
“The dollar has weakened a bit from before and people tend to look to the dollar for guidance,” said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
“The crisis in Europe, Greece, Portugal, Spain is going to put downward pressure on the euro until they are able to sort it out and confidence returns.”
The euro leapt against the Swiss franc on Friday following the Swiss intervention, after earlier plunging to a 15-month low against the franc and tumbling to its lowest level in more than eight months against the dollar.
Investors sold off stocks in Portugal, Spain and Greece on Thursday as market fears over the fiscal problems of debt-laden southern members of the euro zone widened.
The head of the International Monetary Fund called for painful steps to cut huge fiscal deficits across Europe, saying no country should be under the illusion it was possible to escape the financial crisis without paying the cost.
Oils losses on Thursday came after the futures posted their biggest daily percentage gain in four months on Thursday, up 3.8%. But they are still about 50% lower than the record above $147 in July 2008, having shed about $11 from a 15-month high close to $84 on 11 January.
Traders and brokers at several firms said they suspected Thursday’s sell-off in crude was also linked to a hedge fund quickly unloading a big oil position.
A sudden rush of volume in front-month New York Mercantile Exchange (NYMEX) crude oil futures trading during the final moments of open-outcry trading on Wednesday was followed Thursday by the fifth-highest trading volume on record for the contract at nearly 500,000 lots.
“If my fund had cash trouble and I needed the money, I would sell whatever I can,” Chu said.
“It’s definitely possible that we’ll test oil’s lows for the year, especially if the employment number disappoints,” Chu said.
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First Published: Fri, Feb 05 2010. 11 14 AM IST
More Topics: Markets | Oil | Dollar | US | Europe |