BLBG: Oil Falls to Lowest Level in Almost Three Weeks as Dollar Gains
By Margot Habiby
March 22 (Bloomberg) -- Crude oil fell to the lowest price in almost three weeks as the dollar gained against the euro, curbing the appeal of commodities as an alternative investment.
Oil dropped as much as 2.6 percent and the U.S. currency rose to the highest level since March 2 after German Chancellor Angela Merkel said investors shouldn’t expect a European Union summit this week to agree on aid for Greece. Oil also declined after failing to sustain a breach of $83 a barrel last week.
“When the dollar’s strong, the bears in the oil market come out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The oil markets had a second test last week of $83 and failed to break through, so they’ve peeled back.”
Crude oil for April delivery dropped $1.69, or 2.1 percent, to $78.99 a barrel at 10:10 a.m. on the New York Mercantile Exchange. Earlier, it touched $78.57, the lowest price since March 2. Futures have risen 47 percent in the past year. Oil reached $83.09 on March 17, and $82.85 on March 18.
April futures expire at the close of Nymex floor trading today. The more-active May contract lost $1.72, or 2.1 percent, to $79.25 a barrel.
The dollar gained 0.3 percent against the euro to $1.3488 from $1.3530 March 19. Earlier, it touched $1.3464. The currency has strengthened 2 percent since March 12.
“Immediate oil-market fundamentals haven’t justified gains beyond $80,” said Andrey Kryuchenkov, a VTB Capital analyst in London. “Until seasonal demand picks up and reduces the stockpile overhang, we’ll keep trading on external factors such as the dollar and concerns over eventual monetary tightening.”
Chinese Stockpiles
Oil also weakened as China, the world’s fastest-growing energy consumer, reported that record oil imports in February boosted its stockpiles by 5.2 percent from January.
Chinese inventories rose to 28.2 million metric tons (206.7 million barrels), according to China Oil, Gas & Petrochemicals, a newsletter published by the official Xinhua News agency. Stocks of refined products, including gasoline, diesel and kerosene, increased 11 percent to 19.7 million tons, it said.
The Organization of Petroleum Exporting Countries has spare production capacity of more than 6 million barrels a day, said Germanico Pinto, OPEC’s president and Ecuador’s oil minister, said at a conference today in Geneva. That’s a “comfortable cushion of spare capacity,” he said. The organization controls about 40 percent of global crude supply.
United Arab Emirates Oil Minister Mohamed al-Hamli said in Geneva that the global market is well supplied, and the number of days that demand can be met from inventories is higher than normal. The UAE is tied with Kuwait as OPEC’s fourth-largest producer, based on the latest Bloomberg output estimates.
Brent crude for May settlement fell $1.56, or 2 percent, to $78.32 a barrel on the ICE Futures Europe exchange in London.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
