LONDON--Crude futures retreated Thursday as a stronger dollar, due to optimism over the U.S. economic recovery, weighed on sentiment.
With a lack of significant news on fundamentals, oil traders mostly took their cue from the currency market where the dollar staged a strong rally against the euro and the pound partly due to lingering concerns over Greece's debt problems and disappointing U.K. retail sales data.
The front-month February Brent contract on London's ICE futures exchange was down $0.51 at $73.78 a barrel. The front-month January light, sweet crude contract on the New York Mercantile Exchange was trading $0.56 lower at $72.10 a barrel.
The ICE's gasoil contract for January delivery was down $6.25 at $597 a metric ton, while Nymex gasoline for January delivery was down 129 points at 186.10 cents a gallon.
Crude futures rose sharply Tuesday after the U.S. Department of Energy reported bigger-than-expected draws in crude oil stocks and distillate stocks in the U.S., but some analysts said a fair share of bearish content in the data seemed to have been overlooked.
"The strong drawdown in distillates was caused by colder weather and not a rebound in economic activity, with distillate forward cover still more than 15 days higher than the five-year average," said JBC Energy in a research note. "Indeed, it will take more of an ice age, rather than just seasonal weather, to correct this overhang," it said.
The 3.7-million-barrel fall in crude stocks was mainly caused by a big fall in imports, which can be partly attributed to stormy weather in Mexico and foggy conditions in the Houston shipping channel, it said.
Olivier Jakob, managing director of Swiss consultancy Petromatrix, expects "a reversal build of stock in January" as a few supertankers of crude oil that were sitting afloat in Europe are now heading to the U.S.
A total of four very large crude carriers have been employed to ship Forties crude to the U.S. Gulf of Mexico from the North Sea over the past two weeks. A VLCC typically holds 2 million barrels of crude oil.
"In the long run, it pays to ship crude to the U.S., given a much-awaited demand recovery and a potential narrowing of the intermarket spread," said Andrey Kryuchenkov, an analyst at VTB Capital.
Nymex light, sweet crude futures had been trading at a discount to front-month ICE Brent futures since late November, but the spread has been narrowing recently, especially after the January Brent contract expired Wednesday.
Nymex February light, sweet crude futures were trading at a premium of 21 cents to front-month Brent futures for February delivery.
