BLBG: Oil Falls on Stronger Dollar, Speculation U.S. Supplies Gained
Crude oil fell from the highest close in almost four months as a stronger dollar reduced the appeal of commodities to investors, and on speculation that a government report will show U.S. inventories gained.
Oil fell as much as 1.7 percent after the U.S. currency rebounded against the euro. A stronger dollar makes commodities less attractive as a hedge against inflation. U.S. crude oil supplies probably rose last week, according to a Bloomberg News survey before an Energy Department report tomorrow.
“Oil is being held in check by the strength of the dollar,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York.
Crude oil for May delivery fell 96 cents, or 1.8 percent, to $52.84 a barrel at 10:04 a.m. on the New York Mercantile Exchange. Prices are up 18 percent so far this year.
Yesterday, oil closed at $53.80 a barrel, the highest settlement since Nov. 28, after equities surged on speculation that the Obama administration’s plan to rid banks of distressed assets will spur growth.
U.S. stocks declined a day after the Standard & Poor’s 500 Index capped its steepest two-week gain since the 1930s. The S&P index lost 0.6 percent to 817.98. The Dow Jones Industrial Average slipped 0.5 percent to 7,7739.94.
“The oil market is taking a cue from the Dow,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Traders are looking at the Dow for clues on what the economy will do and what that will mean for demand.”
U.S. Inventories
Crude-oil stockpiles rose 1.05 million barrels in the week ended March 20 from 353.3 million the previous week, according to the median of 12 estimates by analysts in the Bloomberg survey. Inventories in the week ended March 13 were the highest since June 2007.
“The fundamentals of supply and demand don’t justify oil going to $55 or $60,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “The supply of oil in the United States definitely doesn’t justify the rally. I think we will go down into the high $40s.”
The report will show that supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, declined last week, according to the survey.
Brent crude oil for May settlement declined 65 cents, or 1.2 percent, to $52.82 a barrel on London’s ICE Futures Europe exchange.
