Thursday 28 March 2024
 
»
 
»
Story

Oil falls below $86 on firm dollar

Singapore, May 4, 2010

Oil fell below $86 a barrel on Tuesday, dampened by the stronger dollar and an expected rise in US crude and fuel stocks, after hitting a 19-month high on  positive economic news the previous day.

The dollar hovered near 8-1/2-month highs against the yen and one-year peaks versus the euro, boosted by robust data that backed views the Federal Reserve will be ahead of its counterparts in Europe and Japan in raising interest rates later this year.

US crude for June fell 32 cents to $85.87 by 0345 GMT, after striking an intraday high of $87.15 on Monday, the strongest front-month price since $89.82 traded on Oct. 9, 2008, also pushed up by a possible short-term supply crunch linked to a massive oil spill off the US Gulf Coast.

London Brent crude slid 31 cents to $88.63 a barrel.

"The oil price is currently relatively high. It is at a level where buyers are likely to be slightly cautious," said David Moore, an analyst at the Commonwealth Bank of Australia.

"The oil price may fall further. It's quite possible for a correction in the market this week."

Higher US oil stocks

US crude inventories likely rose last week as the widening contango structure of the futures curve spurred refiners to import more for storage, a preliminary Reuters poll showed on Monday.

Ahead of weekly inventory data from industry group American Petroleum Institute (API) and the US government Energy Information Administration (EIA), analysts forecast crude stocks increased by 1.2 million barrels last week.

If so, US crude stocks -- currently at their highest level since mid-June 2009 -- would have risen for the 13th time in 14 weeks, and could in some way ease concerns over a possible supply squeeze if the busted well gushing oil in the Gulf of Mexico is not contained quickly.

Distillate stocks, including heating oil and diesel, were forecast up 1.8 million barrels, for the fifth-straight week of a build, while gasoline was predicted rising just 200,000 barrels after a surprise drawdown the week before, the poll showed.

US manufacturing posted its fastest pace of growth in nearly six years in April while data on construction and consumer spending pointed to further strength in the economy, triggering a broad rally in US share markets on Monday.

It also gave a boost to the dollar, which rose 0.13 per cent to a basket of currencies, sending gold down on Tuesday, after hitting its highest price this year overnight.

A strong US currency makes dollar-denominated commodities, such as oil, more costly for holders of other currencies and tends to damp prices.

China's manufacturing sector was still growing briskly, if not overheating as some economists have warned. This was shown in HSBC's China Purchasing Managers' Index (PMI) which was well within the range tracked since late last year even though it dropped in April to a six-month low of 55.4 from 57.0 in March as output, new orders and employment all slowed. – Reuters




Tags: China | Oil | Singapore | Dollar | price | Stockpiles |

More INTERNATIONAL BUSINESS Stories

calendarCalendar of Events

Ads