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Brent falls to 4-week low as dollar rallies

Brent falls to 4-week low as dollar rallies
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First Published: Thu, Aug 04 2011. 12 31 PM IST
Updated: Thu, Aug 04 2011. 12 31 PM IST
Singapore: Brent crude dropped to a four-week low on Thursday, erasing early gains after Japan’s intervention to stem the rise in the yen sent the dollar soaring, with investors steering clear of riskier assets such as commodities.
Worries about slowing global growth and Europe’s worsening debt crisis dampened investor enthusiasm and sent Asian stock markets lower, after a tentative comeback in risk appetite that had given equities a modest early boost.
Uncertainty prevailed before Thursday’s weekly US jobless benefits claims report and Friday’s key nonfarm payrolls data that is forecast to show the economy gained 85,000 jobs in July. The data may shed further light on whether a recovery in the world’s largest economy is faltering.
Brent fell 53 cents to $112.70 a barrel by 0610 GMT, the lowest intraday price since July 6, extending Wednesday’s dip of more than $3. US crude shed 16 cents to $91.77.
“The market still looks quite jittery,” said Serene Lim, a Singapore-based oil analyst at ANZ.
“There seems to be a lot of negative momentum for Brent and technically it looks very weak,” Lim said, after the front-month contract moved below its 100-day moving average price, a key support level for chart watchers.
Brent’s moving average now stands close to $117 a barrel, more than $3 higher than the current price.
Investors are hoping the European Central Bank will signal a more aggressive approach to fighting the region’s debt crisis in a policy meeting on Thursday.
Attention was turning from Italy to Spain, which plans to auction up to €3.5 billion ($5 billion) of bonds on Thursday.
The European Union acknowledged on Wednesday that investors now doubt whether the euro zone can overcome its debt crisis and Italy’s Silvio Berlusconi called for more action to ward off market attacks.
Gasoline futures led the oil complex lower on Wednesday after government data showed US stockpiles of the fuel rose sharply last week while demand over the past four weeks fell 3.6% from a year ago. This stirred worries about tepid consumption during the peak summer demand period.
US gasoline inventories last week rose for the third straight week, up 1.7 million barrels. Four-week average demand, at 9.07 million barrels per day, was the lowest since the week to 20 May.
Still, crude stockpiles at the Cushing, Oklahoma delivery point for the US oil futures contract dropped to the lowest level since December.
Brent’s premium to US crude, also known as West Texas Intermediate and priced at Cushing, narrowed to $21.33. The premium rose to $23.03 on Tuesday, which was the widest since the $23.57 record set on 14 July.
SLOWDOWN AND DEBT CRISIS
A closely-watched index of the vast US services sector unexpectedly fell in July from June, and new US factory orders fell in June, reducing the prospects of a rebound in the second half of the year.
In other markets, Tokyo’s Nikkei jumped on Thursday as the yen fell broadly after Japanese authorities intervened to weaken the currency, a day after the Swiss central bank surprised markets by cutting interest rates to rein in the high-flying franc.
Other Asian stock markets also drifted higher, but worries about global growth were likely to limit investor enthusiasm.
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First Published: Thu, Aug 04 2011. 12 31 PM IST
More Topics: Markets | Oil | Crude | Brent | US |