Oil drops for third day on signs of weak demand
Published 18/10/2010 | 08:55
Oil declined for a third day in New York amid speculation a report on new homes may add to signs US fuel demand will remain weak and as investors sold contracts against a strengthening dollar.
Crude fell as the Dollar Index climbed for a second day, damping the appeal of commodities as an alternative investment.
Ground was broken on 3pc fewer houses in September in the US, the world’s largest oil user, economists estimated before a Commerce Department report tomorrow. Futures declined even as hedge funds last week raised bets oil prices would gain.
“For every bit of economic data, we have to watch a few months to see if there is sign of recovery,” said Ken Hasegawa, a commodity derivative sales manager at brokers Newedge in Tokyo.
“It seems oil will stay in a range between $80 and $84. After oil reached $84 last week, now is a time for profit-taking.”
Crude for November delivery dropped as much as 70 cents, or 0.9pc, to $80.55 a barrel in electronic trading on the New York Mercantile Exchange.
It was at $80.75 at 2:55pm Singapore time. On October 15, the contract lost $1.44, or 1.7pc, to $81.25, the lowest settlement since September 30.
Oil is in the longest pullback since a four-day losing streak through September 17. Futures fell 1.7pc last week, the first weekly drop in four.
The Dollar Index, used by IntercontinentalExchange Inc to track the greenback against currencies including the euro, yen and Swiss franc, added as much as 0.6pc to 77.485. The US currency also climbed 0.7pc to $1.3884 against the euro.
“Oil continues to be heavily impacted by US dollar movements,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd in Melbourne.
“The data out of the US is pretty choppy at the moment. Some are more positive than others, some are weaker than you expect.”
US retail sales in September advanced 0.6pc following a 0.7pc gain in August that was larger than previously estimated, the Commerce Department said October 15.
Purchases were projected to increase 0.4pc, according to the median estimate from 80 economists surveyed by Bloomberg News.
Work began on 580,000 houses at an annual rate, down 3pc from August, based on the median of 56 estimates in a separate poll.
US consumption of refined products rose 1.8pc in September from the year before, signaling demand is recovering as the economy rebounds, the American Petroleum Institute, a Washington-based industry group, said in an October 15 report.
Fuel deliveries, a measure of demand, averaged 18.9 million barrels a day, from 18.6 million in September 2009.
Net-long positions in oil futures and options held by “managed money,” including hedge funds, commodity pools and trading advisers, rose 10,198, or 6.1pc, to 178,738 contracts, according to the US Commodity Futures Trading Commission.
Brent crude for December settlement declined as much as 69 cents, or 0.8pc, to $81.76 a barrel on the ICE Futures Europe exchange in London. On October 15, the contract dropped $1.75, or 2.1pc, to $82.45.