Singapore: Oil was steady below $79 on Tuesday as the dollar stiffened on European sovereign risk woes and forecasts for rising US crude and gasoline inventories capped prices.
The front-month contract for US crude touched $80.62 on Monday, its highest since 13 January, tracking commodity gains led by copper and after Chilean state energy company ENAP said it was boosting diesel imports following Saturday’s earthquake.
But prices retreated after the dollar gained 0.65% against a basket of currencies. On Tuesday the dollar gained a further 0.37% as concern swirled about sovereign risk issues in Europe.
US crude for April delivery rose 9 cents to $78.79 a barrel by 9:38am, while London ICE Brent climbed 11 cents to $77.00.
“The dollar is the big driver, and if it continues to rally, I do expect crude to go lower,” said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
“I am quite skeptical that the problem with the euro is over. I honestly don’t see the dollar weakening against euro.”
US crude inventories probably rose 1.3 million barrels last week amid higher imports, a Reuters survey showed, while gasoline stockpiles may have gained 400,000 barrels.
Distillates, a fuel category that includes heating oil and diesel, probably fell by 600,000 barrels, the poll showed, because of sustained heating demand in the wake of a third major snowstorm to hit the US Northeast, the biggest regional consumer of heating oil.
Industry group the American Petroleum Institute (API) will publish inventory data later on Tuesday, followed by government statistics from the Energy Information Administration on Wednesday.
Positive macroeconomic data from the United States also gave oil prices a temporary boost on Monday, but prices failed to hold above $80 a barrel. Consumer spending increased slightly faster than expected in January, while February growth of the manufacturing sector was slower than forecast.
“In the last week we tried a few times to break above $80.50 and every time we fell,” Chu said. “Chart patterns show there is quite a strong resistance at that level.”
Fears about the ability of a handful of European countries to finance their growing debts have kept a lid on risky assets, even though the global economic recovery generally appears on track.
Asian shares rose for a third straight session, led by tech stocks, while the Australian dollar slid ahead of what is expected to be a close decision by the central bank on whether to raise interest rates again.
Chile’s Aconcagua and Bio Bio refineries, with a combined capacity of 220,000 barrels per day, were damaged in Saturday’s quake. “I would keep an eye on gasoline because of the refinery shutdowns,” Chu said. “If there is structural damage it may cause trouble for gasoline.”
On Sunday a senior military official from Iran, the world’s fourth-largest exporter of crude, said the country could make European nations suffer by cutting off energy supplies and could target any adversary with its missiles.
“So far it is just a shouting match, but that is something that I would definitely pay attention to,” Chu said. “If you don’t let them export oil and they can’t get gasoline, that may push Iran over the edge.”