Concerns over Iran ease a bit; strong U.S. dollar pressures prices
By Myra P. Saefong and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures retreated Wednesday back below $100 a barrel, pressured by a sharply stronger U.S. dollar as traders took in profits after a six-session gain of more than 8%.
Traders awaited weekly U.S. data that are expected to show declines in last week’s crude inventories, but they also remained wary of Iran’s threat to cut off oil shipments in the Middle East region.
Crude for February delivery CL2G -1.49% shed $1.48, or 1.5%, to $99.86 a barrel on the New York Mercantile Exchange. Year to date, crude oil futures trade about 9% higher. Read about oil’s potential 2012 balancing act.
Prices gained 1.7% on Tuesday to tally a six-session climb of 8.4%.
The risk of supply disruptions, with reports Iran has threatened to cut off shipments through the Strait of Hormuz — a key shipping route for oil tankers — helped push crude higher on Tuesday. Read more on Tuesday's crude session.
“Right now, it is all about Iran,” said Michael Fitzpatrick, editor in chief of the Kilduff Report. “The European conundrum has been crowded off the headlines” as traders focus on “what will transpire over Iran’s nuclear ambitions.”
But “be extremely cautious in deciding to ride the back of this tiger, getting thrown off could mean getting eaten,” he said in a report. Read about the outlook for the oil markets and Iran in 2012.
Bahrain-based U.S. Fifth Fleet said it will not allow Iran to disrupt oil shipping through the shipping channel, Reuters reported Wednesday.
“Iran blockading the Strait of Hormuz would have serious implications for global oil prices, and the markets have remained jittery over the possibility,” said Richard Cochrane, IHS Global Insight Middle East and North Africa analyst.
“Nonetheless, such action would also damage Iran’s economy, and risk retaliation from the U.S. and allies that could further escalate instability in the region,” he said in an emailed note Wednesday. “Accordingly, it is not likely to be a decision that the Iranian leadership will take lightly.”
For now, strength in the U.S. dollar also weighed on dollar-denominated oil prices. The dollar index DXY +0.82% , which tracks the U.S. unit against six major currencies, rose to 80.511, from 79.792 in North American trading late Tuesday. Read about currencies action.
Data watch
Later Wednesday, the American Petroleum Institute (API) is due to release its weekly inventory data, followed by the more closely watched U.S. Energy Information Administration (EIA) report Thursday morning. Both reports were delayed due to the Christmas holiday.
Analysts polled by Platts forecast a 2.3-million barrel decline in U.S. commercial crude stocks for the week ended December 23. They also forecast a decline of 500,000 barrels in last week’s gasoline stocks and a drop of 1.2 million barrels in distillate inventories.
The EIA is also expected to report Thursday, as usual, on last week’s natural gas supplies in storage. Analysts polled by Platts expect the data to show a decline of 85 billion to 89 billion cubic feet in natural gas stocks.
At last check, January heating oil HO2F -0.09% was fractionally lower, down 0.1%, at $2.90 a gallon and January gasoline RB2F -1.46% traded at $2.65 a gallon, down 4 cents, or 1.s%.
January natural gas NG12F +0.03% was up 1 cent, up 0.3% at $3.12 per million British thermal units ahead of the contract’s expiration at the close of Nymex trading.
February natural gas NG12G +0.38% was up 2 cents, or 0.5%, at $3.17 per million BTUs.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Virginia Harrison is a MarketWatch reporter based in Sydney.
