BLBG: Oil Falls From 5-Week High, Gasoline Tumbles as Dollar Climbs
By Mark Shenk
Aug. 7 (Bloomberg) -- Crude oil fell from a five-week high and gasoline tumbled as the dollar increased against the euro, reducing the appeal of commodities as an alternative investment.
Oil slipped as the greenback rose versus the currencies of six of the major trading partners of the U.S. Oil prices climbed as much 1.3 percent earlier today as a government report showed that U.S. job losses slowed and that the unemployment rate unexpectedly dropped for the first time since April 2008.
“We rose initially at the release of the jobs data, but oil turned around once the dollar got stronger,” said Tom Bentz a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “Prices are still close to $72, which is too high given where supply and demand are.”
Crude oil for September delivery fell $1.01, or 1.4 percent, to settle at $70.93 a barrel at 2:58 p.m. on the New York Mercantile Exchange. Futures touched $72.84 early today, the highest intraday price since June 30.
Gasoline for September delivery declined 5.26 cents, or 2.6 percent, to end the session at $2.0081 a gallon in New York. It was the lowest settlement since July 30.
Oil has advanced 2.1 percent this week, its fourth weekly increase. Futures have gained 59 percent this year.
“We’ve hit a little bit of a ceiling,” said Tobias Merath, head of commodities research at Credit Suisse Group AG in Zurich. “The speed of the price surge has done some damage to the physical market. The likely path is consolidation in a broad band, with a drop to the mid-$60s before rebounding.”
Dollar Rally
The U.S. currency climbed 1.2 percent versus the euro to $1.4175, from $1.4345 yesterday. The Dollar Index, which tracks the dollar against currencies including the yen, pound and Swedish krona, rose 1.1 percent to 78.945.
The Labor Department reported that payrolls fell by 247,000, after a 443,000 loss in June. The jobless rate dropped to 9.4 percent from 9.5 percent.
“There’s no denying that these numbers are encouraging,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “It’s important to step back a bit. They offer little solace to the almost 7 million people that have already lost jobs, and a 9.4 percent unemployment rate shows that we are still mired in deep recession.”
The latest numbers from the Labor Department brought total jobs lost since the recession began in December 2007 to about 6.7 million, the biggest decline in any post-World War II economic slump.
Demand Outlook
“It only means the momentum in job losses has slowed,” said Harry Tchilinguirian, senior oil market analyst at BNP Paribas SA in London. “Without a recovery in final demand, the recent rebound will run out of steam. Strong surges in consumption are not going to happen at these levels of unemployment.”
U.S. equities rose on the employment report. The Standard & Poor’s 500 Index rallied the most in two weeks, adding 1.5 percent to 1011.98 at 3:42 p.m. in New York. The S&P touched 1,018.00, the highest since Oct. 14.
“The oil market has been caught in the cross-currents of stronger equities and a rising dollar,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “The dollar is having a bigger impact than the S&P today.”
Total U.S. daily fuel use averaged 18.9 million barrels in the past four weeks, down 3.1 percent from a year earlier, according to the Energy Department. U.S. gasoline consumption typically drops after the Labor Day holiday in early September. American motor-fuel demand peaks during the summer months when people take vacations.
Ample Supply
“Gasoline is behaving in a way that makes sense given the season,” Evans said. “It’s clear that inventories are at a comfortable level to meet demand during the last month of the driving season.”
Brent crude oil for September settlement fell $1.24, or 1.7 percent, to end the session at $73.59 a barrel on London’s ICE Futures Europe exchange.
Crude oil may drop next week, a Bloomberg News survey of analysts showed. Twenty-one of 36 analysts surveyed, or 58 percent, said futures will decline through Aug. 14. Eight respondents, or 22 percent, forecast that the market will rise and seven said prices will be little changed.
Crude oil volume in electronic trading on the Nymex was 572,213 contracts as of 3:04 p.m. in New York. Volume totaled 608,028 contracts yesterday, 15 percent higher than the average over the past three months. Open interest was 1.24 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
