BLBG: Crude Oil Falls on Speculation Stockpiles Rose, Dollar Rebound
Crude oil fell on speculation that U.S. oil stockpiles are rising as demand slumps and after the dollar recovered earlier losses against the euro.
U.S. oil inventories probably rose for the 16th time in 18 weeks as refineries reduced operating rates last week, according to a Bloomberg News survey of analysts before an Energy Department report tomorrow. Crude fell as the U.S. currency rebounded against the euro, reducing the appeal of dollar-priced commodities as a hedge against inflation.
“The recent price increase was considered overdone and some investors have preferred to cash in their wins on the back of some dollar strength and negative sentiment on the market,” said Eugen Weinberg, a Commerzbank AG analyst in Frankfurt. “The expectation of rising inventories for tomorrow limits the upside.”
Crude oil for March delivery fell as much as $1.33, or 2.9 percent, to $44.40 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $44.89 at 1:45 p.m. London time.
The euro traded at $1.3171 at 1:20 p.m. London time, down 0.13 percent. It earlier rose as high as $1.333.
Goldman Sachs Group Inc. today said risks to oil price movements remain to the “downside” and a rise in prices last week does not represent an end to the current bear market.
“We believe that it is premature to get long oil and prefer to remain short until inventories stop building and demand weakness subsides,” Goldman Sachs analysts wrote in a report.
Cold Weather
March futures rose 9 percent last week to $47 a barrel because of “temporary factors” such as cold weather in the U.S. and storage demand for refined products, according to Goldman Sachs report.
Brent crude oil for March settlement fell as much as $1.74, or 3.7 percent, to $45.22 a barrel on London’s ICE Futures Europe exchange, and was trading at $45.84 at 1:22 p.m. local time.
“Demand destruction is not fully priced in,” said Bayram Dincer, a commodity analyst at Dresdner Bank AG in Zurich. “With very poor economic performance, the supply-demand equation still indicates further demand decreases.”
U.S. crude stockpiles probably increased 2.5 million barrels in the week ended Jan. 23 from 332.7 million the week before, according to the median of seven analyst estimates before an Energy Department report this week. All the analysts said supplies would rise from a 16-month high the week ended Jan. 16.
