Oil drops as dollar strengthens against euro
Crude oil fell as the dollar headed for its biggest weekly increase against the euro since January, curbing the appeal of commodities as an alternative investment.
Oil fell below $81 a barrel as speculation that Greece may fail to secure financial assistance from the European Union weakened the euro.
Total US fuel demand dropped the most since November in the week ended March 12, the Energy Department reported this week.
“The market looks like it’s tracking the dollar play,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It’s also retreating from the $83 level because fuel demand dropped below the five-year average.”
Crude oil for April delivery fell $1.42, or 1.7pc, to $80.78 barrel at 10:25am on the New York Mercantile Exchange.
Earlier, it touched $80.43, the lowest price in four days. Oil settled at a 10-week high of $82.93 on March 17. Futures are down 0.6pc this week from $81.24 on March 12.
The dollar traded at $1.3530 against the euro, compared with $1.3608 yesterday. It’s poised to gain 1.7pc this week, the biggest increase since the week ended January 29.
Total fuel demand dropped by 4.2pc to 18.8 million barrels a day last week, 7.8pc below the five-year average for the second week in March. It was the biggest one-week decline since the week ended November 6.
“The strong US dollar is weighing on prices today, but the general view is still positive,” said Carsten Fritsch, an analyst with Commerzbank AG in Frankfurt.
“The positive OPEC view on demand developments and tentative signs that demand in the US is improving” will help support prices, he said.
The Organization of Petroleum Exporting Countries agreed this week at a meeting in Vienna to keep output quotas unchanged for a fifth consecutive time.
Saudi Arabian Oil Minister Ali al-Naimi said prices were “beautiful” and demand should rise by about 1 million barrels a day in the second half of the year.
Brent crude for May settlement on the London-based ICE Futures Europe exchange fell $1.20, or 1.5pc, to $80.28 a barrel.
Oil prices may fall next week on rising US supplies and speculation that fuel consumption will decline next month, a Bloomberg News survey showed.
Seventeen of 38 analysts and traders, or 45pc, said oil will drop through March 26.
Twelve respondents, or 32pc, predicted that futures will climb and nine said there will be little change in prices. Last week, 46pc of respondents predicted there would be a decline in futures.