| Oil dives below 50 on dollar gains { May 12 2005 } Original Source Link: (May no longer be active) http://www.reuters.com/newsArticle.jhtml;jsessionid=ANGVXX2VKMBUECRBAE0CFEY?type=businessNews&storyID=8469276http://www.reuters.com/newsArticle.jhtml;jsessionid=ANGVXX2VKMBUECRBAE0CFEY?type=businessNews&storyID=8469276
Oil dives below $50 on plump U.S. stocks Thu May 12, 2005 07:39 AM ET
LONDON (Reuters) - Oil dropped below the $50 threshold on Thursday as a strengthening U.S. dollar extended a heavy fall driven by rising U.S. crude stocks and signs of slowing global demand growth. U.S. crude (CLc1: Quote, Profile, Research) fell 65 cents to $49.80 a barrel, deepening a drop of more than $1.60 a barrel, or 3 percent, on Wednesday. Prices are now more than 14 percent below the record-high of $58.28 struck in early April.
London's Brent crude oil (LCOc1: Quote, Profile, Research) dropped 74 cents to $49.33 a barrel, hitting its lowest level since March 1.
Prices fell as the U.S. dollar hit a three-month high against the euro at $1.2741, extending gains made on a narrower U.S. trade deficit and as some investors bet on a strong U.S. retail sales report.
Oil has been reluctant to make a decisive break below $50, because big-money investment funds have viewed any price drop as a buying opportunity. Even so, further gains in the dollar could place more downward pressure on oil, traders said.
"It depends largely on what the U.S. dollar does. If the euro weakens to around 1.25, I think the funds will liquidate further length in oil," said Tony Machacek of Bache Financial in London.
Falls in the dollar's value this year and last have helped lift oil prices, by insulating non-dollar economies from the impact of higher oil prices. Investment funds have also switched from treasury markets into commodities and energy.
Oil's Wednesday slide came as the U.S. government said heavy imports pushed crude oil stocks in the United States, the world's top energy consumer, to a six-year high last week.
Inventories rose by 2.7 million barrels to 329.7 million -- a tweflth rise in the last 13 weeks and are now 30.3 million barrels higher than year-ago levels, the U.S. Energy Information Administration (EIA) said.
SLOWING GROWTH
Sentiment was also dampened by a report from International Energy Agency (IEA) saying that high fuel prices were slowing oil demand growth in key markets China, Europe and the U.S.
First-quarter demand growth in the U.S. slowed to 250,000 bpd, or 1.2 percent, from 340,000 bpd, the IEA said.
China's demand growth slackened to 4.5 percent in the first quarter of this year from 19.3 percent a year ago. The West's energy watchdog trimmed its annual China demand growth projection by 30,000 barrels per day (bpd) to 470,000 bpd.
"That would put more pressure on prices, particularly the downward forecast on Chinese demand. China has been the prime driver of global rise in consumption over the past year or so," said Daniel Hynes, at ANZ Institutional Banking.
Some said the EIA's report of a mild rise in weekly U.S. gasoline stocks of 200,000 barrels, ahead of the summer driving season, could limit further losses.
"The key was lower-than-expected production. Refiners are coming back from maintenance significantly more slowly than expected and East Coast refiners look to be having problems maintaining their light product yields," Paris-based SG Commodities said in a report.
|
|