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Oil falls to $77 as firmer dollar counters recovery

Oil falls to $77 as firmer dollar counters recovery
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First Published: Thu, Feb 18 2010. 09 03 AM IST
Updated: Thu, Feb 18 2010. 09 03 AM IST
Singapore: Oil fell towards $77 a barrel on Thursday, dragged by the stronger dollar and weaker gold prices, which also dampened other commodities, outweighing upbeat news on the US economy.
The dollar rose to near nine-month highs on the euro, which was hounded by sovereign debt woes and weak growth outlook, in contrast to news that Federal Reserve policy makers, confident in the U.S. recovery, aim to begin selling securities soon.
US crude for March delivery fell 30 cents to $77.03 a barrel at 0358 GMT. London Brent crude for April lost 31 cents to $75.96 a barrel.
“The US dollar has rebounded, as it was pretty much oversold previously,” said Peter McGuire, managing director of Commodity Warrants Australia in Sydney.
“All the commodities went up on Tuesday evening, but a lot of them took a nosedive.”
The dollar index rose 0.2% against a basket of currencies to near seven-month highs, making oil and other commodities more expensive for holders of other currencies. The Australian dollar was under pressure on plans by the International Monetary Fund to sell more of its gold holdings, which sent the precious metal down 0.4% to $1,101.50 an ounce. Gold had peaked at $1,126.85 on Wednesday, the highest since 20 January.
“Gold was off nearly $20 from a high, and that probably floated a little across to the crude market,” said McGuire.
He added that crude prices will be rangebound around the $70 level in the short term.
But other analysts are more optimistic, saying that demand for crude is expected to stay strong due to the recovery underway in Asia and the United States.
“The demand profile remains robust, with growth outpacing supply-side additions,” Barclays Capital said in a report. “With even the middle of the barrel likely to show some relative improvement in the second quarter, the likely price momentum remains skewed to the upside, in our view.”
Barcap added that the trading range should start to move up, with $80 per barrel transitioning from being an effective ceiling to becoming an effective floor.
“The level of floating crude inventories not in transit continues to fall and should become insignificant over the next couple of months,” it added.
But in the short-haul, oil prices may not see any major upward movement as distillates stocks held on tankers remained a worry despite the recent falls, other traders said.
US crude inventories edged down unexpectedly by 63,000 barrels last week — versus forecasts for a 2.2. million-barrel rise — as refineries increased activity, data from industry group American Petroleum Institute showed..
Gasoline inventories rose 1.4 million barrels, while distillates — which include heating oil and diesel — rose 1.3 million barrels. (EIA/S]
The US Energy Information Administration’s oil inventory report will be published on Thursday at 1600 GMT.
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First Published: Thu, Feb 18 2010. 09 03 AM IST
More Topics: Markets | Oil | Crude | Gold | Commodities |