Oil slumps on strong dollar

Oil slumps on strong dollar

Singapore: Oil fell further in Asian trade on Friday as a strong US dollar dampened investor appetite for crude futures, analysts said.

New York’s main contract, light sweet crude for April delivery, fell 29 cents to $81.91 a barrel.

Brent North Sea crude for May delivery eased 26 cents to $81.22.

The crippling debt crisis facing Greece remained a drag on the euro as investors turned to the US dollar which is regarded as a safe haven asset during a crisis.

“The lingering and unresolved situation with the Greek fiscal troubles has strengthened the US dollar versus the euro," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

“That has caused some selling of oil futures," he said.

A stronger greenback makes dollar-denominated crude more expensive for buyers using weaker currencies.

The dollar soared in New York after Greek Prime Minister George Papandreou said on Thursday his country would go to the International Monetary Fund for cash if fellow European Union members failed to step in.

His remarks sent the euro plummeting to a day low of $1.36, before a modest recovery.

In Asian trading on Friday, the euro changed hands at $1.361 compared with 1.360 in late US trade Thursday.

Analysts also said oil futures prices had risen too fast in recent days and did not reflect demand on the ground.

“Prices are running ahead of fundamentals and remain disconnected from the physical market," said Mike Fitzpatrick, vice president of MF Global.

Crude futures had risen on Wednesday on signs of stronger energy demand in the United States and after the OPEC oil cartel decided to freeze its output levels in line with market expectations.

The US Department of Energy said stockpiles of distillates, including diesel and heating fuel, fell more than expected, by 1.5 million barrels, in the week ending 12 March. Gasoline sank 1.7 million barrels, widely topping forecasts.

OPEC left its output ceiling unchanged at 24.84 million barrels a day at a meeting in Vienna, citing uncertainty in the macroeconomic environment and world oil demand.

OPEC said it would review the economic situation at its next ordinary meeting in Vienna on 14 October.