WSJ:OIL FUTURES: Crude Down, Tracks Weaker Euro On Economy Worries
--Oil down, tracking weaker euro, capping upside on worries over proposed EU Iran oil ban
--Iran risk premium mostly priced in, markets focusing on currency, economic worries
--Brent's failure to push up through $115/bbl earlier could presage more downside, says analyst
By Selina Williams
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Crude oil futures were lower Thursday as the euro fell against the dollar, capping upside on worries over the impact of a proposed European Union embargo of Iranian oil imports.
With the Iran risk premium mostly priced in for now, energy markets are expected to remain focused on currency markets and the broader economic situation in the euro zone until more details emerge on the timeline of the potential Iran oil ban and how it will work, analysts said.
At 1113 GMT, the front-month February contract on the New York Mercantile Exchange was trading down 63 cents, or 0.6%, at $102.59 per barrel. The front-month February Brent contract on London's ICE futures exchange was down 1 cents at $113.69 a barrel.
At 1035 GMT the euro fell to an intraday low of $1.2830 from $1.2943 late in New York Wednesday, as fresh concerns about Europe's debt crisis weighed on sentiment following a raft of negative news overnight.
Even France's mostly successful bond auction, where the triple-A credit rated nation managed to sell almost all of the EUR8 billion it had hoped to sell did little to calm fears in currency markets earlier Thursday.
A stronger dollar is negative for oil prices as the commodity becomes more expensive for holders of other currencies.
The fact that Brent crude was unable to push up through $115 a barrel in a rally earlier Thursday could presage more downside to come on oil prices, said Ole Hansen, futures, fixed income trading desk manager at Saxo Bank.
"Economic activity isn't justifying oil prices at these levels...so it will be sitting in the back of people's minds that should we see any easing off of the [Iran] tension, there could be quite a bit of selling pressure coming into the market," Hansen said.
Hansen estimated the current Iran premium in the Brent oil price at around $5 to $6 a barrel.
Later Thursday, participants in the energy market will look to the U.S. Department of Energy's weekly report on crude oil inventories, due at 1530 GMT, for short-term direction. However, the data, which is for the last week of 2011, may not necessarily be indicative of broader supply/demand trends as refiners tend to run stocks down at the end of the year for tax and technical reasons, analysts say.
Late Wednesday, industry trade group the American Petroleum Institute reported that crude inventories fell by 4.4 million barrels. A consensus estimate of analysts surveyed by Dow Jones Newswires is forecasting a drop of 900,000 barrels.
At 1112 GMT, the ICE's gasoil contract for January delivery was up $3.75 at $968.50 per metric ton, while Nymex gasoline for February delivery was down 166 points at $2.7686 per gallon.
