Wednesday, 11 March 2015 02:24
NEW YORK: A rallying dollar punished oil on Tuesday, with Brent prices falling more than U.S. crude as players took profit on recent highs in the spread between the two, traders said.
Brent, the London-traded global oil benchmark, slumped more than 3 percent as expectations of a mid-year U.S. rate hike sent the dollar soaring to multi-year highs, making commodities denominated in the greenback costlier for holders of other currencies.
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In New York, U.S. West Texas Intermediate (WTI) crude fell almost 3 percent, weighed down by the dollar and expectations that U.S. crude inventories had swelled to another record high last week from new supply builds.
Traders said WTI saw less pressure than Brent as players bet on a further narrowing of its discount to the London benchmark after forecasts for a modest build last week in the Cushing, Oklahoma delivery point for U.S. crude versus the rest of the country.
“The dollar’s might is creating unexpected headwinds for oil. Brent particularly is taking it harder than WTI as people unwind and take profit in the spread between the two,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York.
Brent was down $ 2 a barrel at $ 56.53 by 12:36 p.m. EDT (1636 GMT). U.S. crude fell $ 1.40 to $ 48.60.
The Brent-U.S. crude differential fell to a 3-week low under $ 8 a barrel on Thursday. The spread had narrowed by nearly 40 percent since hitting an end-February peak of $ 13, its highest in 13 months.
Carsten Fritsch, an oil analyst at Commerzbank, cautioned about a capitulation in Brent prices once it went below key support level 57.80.
“Brent is looking increasingly heavy with a decline likely to lowest levels in almost four weeks expected within the next couple of sessions,” oil analysts at Jefferies Futures said in a note.
According to a Reuters survey, U.S. crude stocks are set to extend their record build for a ninth week.
Investors are waiting for weekly inventory reports from industry group the American Petroleum Institute later on Tuesday, and official stockpile numbers from the U.S. government’s Energy Information Administration on Wednesday.
Copyright Reuters, 2015
