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Published: Tuesday October 27, 2009 MYT 7:40:00 AM
Updated: Tuesday October 27, 2009 MYT 1:08:24 PM

Oil hovers below US$79 in Asia trade Tue(update)


SINGAPORE: Oil prices lingered below US$79 a barrel Tuesday in Asia after three days of losses as investors eyed a volatile U.S. dollar.

Benchmark crude for December delivery rose 12 cents to $78.80 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

The contract fell $1.82 to settle at $78.68 on Monday.

Crude jumped to a 12-month high at $82 a barrel last week as the dollar weakened amid concerns that massive global stimulus spending will eventually spark inflation.

Since oil is priced in dollars, a drop in the U.S. currency makes it cheaper to international investors.

The euro touched a 14-month high of $1.5061 on Monday before closing at $1.4861.

The euro strengthened slightly to $1.4882 in early Asian trading while the dollar fell to 92.06 yen from 92.21.

"A weakening dollar could put significant pressure on dollar-denominated oil prices in the months ahead," Bank of America Merrill Lynch said in a report.

"The combination of surging money supply, a rapidly weakening dollar and a cyclical improvement in oil demand could push oil prices above $100." Some economists, such as Jorg Zeuner of Liechtenstein-based VP Bank, expect the dollar and oil to stabilize over the next three to six months as inflation fears ease. And burgeoning inventories will likely satisfy any boost in demand triggered by a recovering global economy. "We expect producers to increase output if prices keep rising," Zeuner said. "We don't think producers would risk killing the recovery by letting prices go to $100." In other Nymex trading, heating oil was steady at $2.03 a gallon. Gasoline for November delivery held at $2.03 a gallon. Natural gas for November delivery slid 1.0 cent to $4.50 per 1,000 cubic feet. In London, Brent crude for December delivery rose 6 cents to $77.32 on the ICE Futures exchange. - AP

Crude oil prices fall more than 2%

NEW YORK: The crude rally hit the brakes Monday with a barrel of oil tumbling more than 2 percent, as the dollar strengthened after hitting a 14-month low.

Bnchmark crude for December delivery fell US$1.82 to settle at $78.68 a barrel on the New York Mercantile Exchange.

PFGBest analyst Phil Flynn said weakness in the U.S. dollar has driven the price of oil far beyond the realities of what normal supply and demand fundamentals typically bear.

"The increase was driven not so much by demand but by declining gas production and a weakening dollar," Flynn said in his morning report.

"Things are out of whack as (U.S.) refiners have scaled back production to historic lows as their margins get squeezed."

Crude prices, which rose to $82 last week, fluctuated Monday as the dollar hit a fresh 14-month low against the euro before strengthening. Because commodities are priced in dollars, a drop in the U.S. currency makes them cheaper to international investors.

The euro touched a 14-month high of $1.5061 in overnight trading before falling to $1.4859 in New York Monday afternoon.

Late on Friday in New York, the euro was at $1.5002.

Meanwhile, traders will be looking to a slew of corporate results and economic indicators for guidance this week.

The Commerce Department is scheduled to announce third-quarter gross domestic product, with reports on housing prices, new home sales, consumer confidence and durable goods orders also due during the week.

Third-quarter earnings from Kellogg Co., Procter & Gamble Co. and Visa Inc. will provide insight into consumer spending while ConocoPhillips, Exxon Mobil Corp., Aetna Inc. and MetLife Inc. are also due to announce results.

"If the oil price continues to rise in the next week or two, there is a danger that economic recovery will be strangled at birth and these fears will give rise to talk that OPEC must act to put more oil into the market to cap prices," said a report from Britain's KBC Market Services.

"Today's $80 (per barrel) price is not firmly grounded because the fundamentals for both the economy and the oil market remain weak."

A new cease-fire agreement between the Nigerian government and rebels in the oil-rich Niger Delta region was helping to keep a ceiling on oil prices.

Unrest in the region had cut Nigeria's oil production by about a million barrels a day, allowing Angola to overtake it as Africa's top oil producer.

In other Nymex trading, heating oil fell 4.21 cents to settle at $2.0335 a gallon.

Gasoline for November delivery lost a penny to settle at $2.0338 a gallon.

Natural gas for November delivery slid 27.4 cents to settle at $4.513 per 1,000 cubic feet.

In London, Brent crude for December delivery gave up $1.66 to settle at $77.26 a barrel on the ICE Futures exchange. - AP


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