BLBG: Oil Declines as Dollar Strengthens, Crude Stockpiles Increase
By Rachel Graham
March 18 (Bloomberg) -- Crude oil fell for the first time in three days as a stronger dollar weakened demand for most commodities and a report showed U.S. crude stockpiles increased last week.
The dollar index, which measures the dollar against six other major currencies, rose for the first in three days. Crude oil inventories grew last week to the highest level since August, according to a U.S. government report yesterday.
“Currency is a short-term factor for the oil market,” said Christophe Barret, a Credit Agricole CIB oil analyst in London. “Prices are disconnected from the physical market; demand looks very weak.”
Crude oil for April delivery dropped as much as $1.04, or 1.3 percent, to $81.89 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.42 at 10:55 a.m. London time. Yesterday, crude gained $1.23, or 1.5 percent, to settle at $82.93, the highest close since Jan. 6.
Brent crude for May settlement fell 54 cents, or 0.7 percent, to $81.42 a barrel as of 10:56 a.m. on the ICE Futures Europe exchange in London.
U.S. crude inventories rose last week for a seventh week to 344 million barrels, according to the U.S. Department of Energy. Demand for crude will remain weak as refiners in Europe and Asia continue maintenance, Barret said.
Gasoline Stockpiles Fall
Oil may trade between $65 and $85 a barrel for the rest of the year, said Angelos Damaskos, who manages the Junior Oils Trust in London, a fund that invests in exploration companies.
“The oil price could come down. There has been a lot of restocking already,” Damaskos said by phone.
Gasoline stockpiles in the U.S. fell for a second week, declining 1.71 million barrels to 227.3 million in the week ended March 12, according to the Department of Energy. Stockpiles of the motor fuel are about 5 percent above the same time last year.
Demand for the motor fuel in the U.S., its biggest market, remains below 2007 levels, according to Barret at Credit Agricole CIB.
“We are still seeing oversupply in the western economies,” Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney, said by telephone today. “U.S. fuel demand is looking slightly better than a year ago, but it’s far from being a tight market.”
To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net
