In spite of favourable movements in currency and equity markets, crude fell as the mood in the commodity markets was dominated by demand concerns.
The US dollar declined today after spiking on Timothy Geithner’s comments that the US was not trying to push down the greenback.
The US Treasury Secretary told the Wall Street Journal that major currencies were in alignment and there was no need for the dollar to fall further.
However, the American currency failed to hold on to its gains, still feeling pressure from anticipation of further quantitative easing from the Fed.
The prevailing market sentiment is that the Fed could take stimulus action as soon as next month.
A weaker US dollar makes the dollar-denominated crude cheaper for holders of other currencies, lifting demand.
Trends in equity markets provided support for the prices as futures for the main stock market indexes in the US rose, signalling more gains following yesterday’s rally.
However, all of the positive factors were outweighed by Wednesday’s inventories report from the US Energy Department.
The data showed that gasoline stockpiles unexpectedly added 1.3 million barrels last week, pointing to a decline in demand in the world’s largest energy consumer.
The report also revealed that crude inventories in the US added 700,000 barrels.
US light, sweet crude for December delivery, which is currently the most actively traded crude contract on the New York Mercantile Exchange (NYMEX) declined to US$82.19/barrel. Crude for January delivery traded at US$83.01/barrel, slightly below yesterday’s levels.
December Brent Crude last traded at US$83.59/barrel on the ICE Exchange, while the January contract stood at US$84/barrel.
Blue chip oil and gas producers were headed in different directions today. BP (LON:BP) declined 1%, while fellow supermajor Shell (LON:RDSB) posted a small gain.
BG Group (LON:BG) added 1%, while Cairn Energy (LON:CNE) shed 1%.
Tullow Oil (LON:TLW) slipped 3.2% after reporting that its well in Ghana encountered water bearing reservoirs.
Oil and gas engineering firms fell into the same patters as while Amec (LON:AMEC) posted a small loss, Petrofac (LON:PFC) rose marginally.
Heritage Oil (LON:HOIL) and Premier Oil (LON:PMO) led the midcaps with gains of about 2%.
Dana Petroleum (LON:DNX) and Dragon Oil (LON:DGO) were little moved.
JKX Oil & Gas (LON:JKX) and Soco International (LON:SIA) were sitting just below the opening levels, while Melrose Resources (LON:MRS) and Salamander Energy (LON:SMDR) retreated 1%.
Service companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) tacked on less than 1%.
Energy sector focused investor Xtract Energy (LON:XTR) was among the top performing small caps with a 6% gain.
