BLBG: Crude Oil Falls From One-Year High as Dollar Pares Decline
By Rachel Graham
Oct. 20 (Bloomberg) -- Crude oil fell from a one-year high as the dollar pared losses against the euro and OPEC Secretary- General Abdalla El-Badri said prices above $80 will hamper economic growth.
Oil traded above $80 as the dollar index, which measures the U.S. currency against six major currencies, fell to its lowest since August 2008, boosting the appeal of commodities as a currency hedge.
“The oil price going further up from here is perhaps the biggest risk to the global economic recovery,” said Kaha Kiknavelidze, a managing partner at London-based Rioni Capital Partners LLP, a hedge fund that specializes in emerging markets.
Crude oil for November delivery fell as much as 55 cents, or 0.7 percent, to $79.06 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $79.35 a barrel at 11:10 a.m. London time.
Earlier, prices rose as much as 44 cents, or 0.6 percent, to $80.05 a barrel on the New York Mercantile Exchange, the first time the front-month contract has traded above $80 since Oct. 14, 2008.
The November contract expires today. The more-active December future was at $79.38 a barrel, down 23 cents.
The U.S. currency traded as low as $1.4994 per euro, the weakest since August 2008. It then recovered to $1.4959.
Prices have gained 78 percent this year, accelerating its climb as a recovery in stock markets emboldened investors and the sliding dollar prompted buying of commodities.
“Most of the recent U.S. data is supportive of the view that we are returning to some kind of normality,” said Paul Harris, head of natural resources risk management at the Bank of Ireland. “That is making it easy for people to go long oil.”
‘No Shortage’
El-Badri said he doesn’t expect prices to reach $100 in the near future because there’s “no shortage of oil supply.”
The rally to more than $80 a barrel was driven by higher equities, the sliding dollar and speculation, he told reporters in London today. The 125 million barrels of crude oil and oil products currently in floating storage is a concern for the Organization of Petroleum Exporting Countries, he said.
“When we see that floating storage eliminated it means demand is coming,” El-Badri said. “We are seeing an $80 oil price that is a little bit high.”
U.S. gasoline and distillate fuel inventories probably declined for a second week, according to the median of seven estimates from analysts surveyed by Bloomberg News before an Energy Department report tomorrow.
Gasoline Inventories Fall
Gasoline stockpiles are expected to have fallen 1.5 million barrels in the week ended Oct. 16. Oil advanced last week after the department posted an unexpected decline in supplies as refineries idled units. The 5.23 million-barrel drawdown was the steepest since Hurricanes Gustav and Ike shut refineries representing about a fifth of U.S. capacity in September 2008.
Stockpiles of distillates, a category that includes heating oil and diesel, fell 1.5 million barrels last week from 170.7 million, the survey showed. Crude oil inventories probably rose 1.5 million barrels from 337.8 million barrels.
The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington. The industry-funded American Petroleum Institute will put out its data today.
Brent crude oil for December settlement fell 21 cents, or 0.3 percent, to $77.56 a barrel on the London-based ICE Futures Europe exchange as of 11:20 a.m. local time.
