A spirited run above $80 failed to extend for crude as the commodity came under relentless selling pressure amid spectacular dollar strength. The prices may look for find a support from the upbeat US GDP numbers, which showed that the fourth quarter economic growth advanced by the highest growth rate since 2003. Contributing to the economic expansion was an increase in consumer spending which makes up roughly two-thirds of U.S. economic activity. Consumer spending rose by 2.0 percent in the quarter after an increase of 2.8 percent in the third quarter.
The surge in consumer spending is a friendly factor for oil but the supplies data may keep a lid on runaway gains even from these levels. Oil is currently at a six week low and the steady flow of supplies in the world's largest oil consumer may push the commodity further below, with the next support of $70 very much coming in sight. The U.S. Senate has unanimously passed sanctions on foreign companies that sell refined petroleum to Iran, holder of the world's second-largest crude reserves.
U.S. crude oil and gasoline inventories are more than 4 percent over the five-year average level, according to Energy Department data released on Jan. 27. Distillate fuel stockpiles, including heating oil and diesel, climbed to 157.5 million barrels last week, 16.2 percent above the average. China's moves to rein in credit earlier in the month also raised concerns about the pace of economic growth and oil demand.
MCX Crude oil futures have dipped in tandem with the global prices, skidding under Rs 3400 per barrel for a while. The level marks a very significant support for the commodity. Dollar would be a critical guarding force and selling pressure may stay unabated as tepid energy demand in Japan and the United States and expectations that OPEC producers will boost exports would keep buyers uninterested in the commodity.
Dollar is under 1.3900 against the Euro. A stronger dollar often indicates investors are funneling cash away from riskier assets, such as commodities. It also can curb demand for crude oil from buyers who hold other currencies, since oil is priced in dollars.
