ZAW: OIL FUTURES: Crude Steady As Market Mulls Dollar Link
By Nick Heath
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Crude oil prices were little changed Monday, with market participants cautious on the link between oil prices and the dollar amid prospects of improved crude demand.
Crude prices fell Friday, despite latest U.S. jobs data indicating the economy may be reaching its nadir. Instead an ensuing strengthening in the dollar triggered selling on crude, even though the data boosted equities and pressaged conditions which might boost crude demand in the future. Oil is used by some investors as a currency and inflation hedge.
"We could potentially be at a bit of a crossroads, but it's too early to say. If we have another set of positive numbers and another bout of dollar strengthening, then maybe there will be another look at that link with dollar and oil," said Ole Hansen, manager of futures trading at Saxo Bank in Copenhagen. "We need to confirm over the next couple of weeks how much has been driven by a weaker dollar and how much by the famous green shoots."
At 1047 GMT, the front-month September Brent contract on London's ICE futures exchange was down 10 cents at $73.69 a barrel.
The front-month September light, sweet, crude contract on the New York Mercantile Exchange was trading 11 cents lower at $70.82 a barrel.
The ICE's gasoil contract for August delivery was down $4.50 at $603.00 a metric ton, while Nymex gasoline for September delivery was up 29 points at 201.10 cents a gallon.
If crude's recent relationship with the dollar holds true, any dollar strengthening due to data indicates crude prices could drop further.
Monday, the dollar was marginally weaker against most major currencies, with attention turning to the start of the Federal Reserve's two-day meeting Tuesday.
However, some participants said that a more bullish economic outlook would provide fundamental support to crude prices - even though current demand remains weak and global inventories swollen.
The U.S. Labor Department Friday reported that July non farm payrolls fell by 247,000, the smallest job loss since August 2008. The unemployment rate fell to 9.4% in July from 9.5% in June, its first decline since April 2008.
"Many indicators are now starting to draw the same timely shape of a peak in destruction during the first quarter," said Olivier Jakob, managing director of Swiss consultancy Petromatrix. "There is not enough demand and stocks levels are too high to justify an immediate return of crude oil to $100 a barrel, but the current trends in the global economic indicators will justify buying on corrective dips."
Traders kept a cursory eye on Atlantic weather charts Monday after the U.S. National Oceanic and Atmospheric Administration forecast that a weather system off the Cape Verde islands in the eastern Atlantic had a "30%-50%" chance of becoming a tropical cyclone within the next 48 hours. The Atlantic hurricane season, which typically enters its peak period in August and September, can disrupt U.S. Gulf of Mexico oil and gas production, as well as prompt shutdowns at coastal refineries.
-By Nick Heath; Dow Jones Newswires; (4420) 7842 9405; nicholas.heath@dowjones.com
