MW: Oil futures drop below $86 as dollar gains vs. major rivals
China's economy grew 11.9% in first quarter of 2010, data showed Thursday
FRANKFURT (MarketWatch) -- Crude futures edged lower on Thursday, as the U.S. dollar's rise against other major currencies encouraged traders to lock in some recent gains.
Crude oil for May delivery, the front-month contract, dropped 27 cents, or 0.3%, to $85.57 a barrel in electronic trading on Globex.
The greenback's gains reduced the attractiveness of dollar-denominated commodities such as oil and gold.
The dollar index (DXY 80.71, +0.52, +0.65%) , which measures the greenback against a trade-weighted basket of six major currencies, rose to 80.619 from 80.195 in late North American trading on Wednesday.
Earlier in the session, the May crude contract hit an intraday high of $86.32 a barrel.
Crude futures rose 2.1% on Wednesday after data showed that U.S. weekly crude inventories declined by 2.2 million barrels, defying analyst expectations of another build-up in stocks.
China's economy grew 11.9% in the first quarter from the year-earlier period, marking the fastest expansion in nearly three years, according to data released on Thursday. In the last quarter of 2009, Chinese gross domestic product increased 10.7%.
Positive economic news tends to boost oil prices because it raises expectations of a swift recovery in the global economy and oil demand. However, Thursday's better-than-expected data also raised concerns that the Chinese government may have to act to cool the fast pace of economic growth.
"Strong GDP growth confirms the rapid growth of energy needs," said analysts at Commerzbank AG in a note to clients. "But there is another side to the data, as it also demonstrates the necessity to curb this fast pace of growth."
"Consequently, the current driving force in the expansion of global oil demand could lose some strength," the analysts said.
Also on Globex, May natural-gas futures dropped 5 cents, or 1.2%, to $4.15 per million British thermal units. The Energy Information Administration will report data on natural gas in storage later in the session.
