BLBG: Crude Oil Pares Gains as Dollar Strengthens Against Euro, Pound
By Ayesha Daya
March 1 (Bloomberg) -- Crude oil reversed earlier gains as the dollar strengthened against the euro and pound, lessening the appeal of commodities, before reports later today detail the pace of U.S. economic growth.
Oil was little changed below $80 a barrel, after paring an earlier 1.2 percent gain, as the dollar rallied against the pound and euro on speculation European nations will struggle to rein in record budget deficits.
“The $80 mark indicates the upper end of the $70-$80 trading range that has been going on for some months now, and when we look at fundamentals we don’t see many reasons for oil to break that level,” said Tobias Merath, head of commodity research at Credit Suisse Group AG in Zurich. “Weak demand in the U.S. and OECD countries are putting a cap on performance.”
Crude for April delivery was little changed at $79.96 as of 1:30 p.m. in London after rising as much as 96 cents earlier in electronic trading on the New York Mercantile Exchange. Brent crude for next month rose 35 cents to $77.94 on London’s ICE Futures Europe exchange.
Nymex crude gained 1.9 percent on Feb. 26 after a report on U.S. gross domestic product showed investment in equipment and software increased at the fastest pace in a decade, renewing optimism that the recession has ended. Federal Reserve Chairman Ben S. Bernanke said last week that the U.S. economy is in a “nascent” recovery.
Later today, economists polled by Bloomberg expect the Institute for Supply Management to say its U.S. manufacturing index declined to 58 last month from a January reading of 58.4. A figure higher than 50 signals expansion.
“If the data comes in good later today, we might see another test of the $80 mark,” Merath said.
A weekend earthquake in Chile earlier boosted oil prices as copper for three-month delivery on the London Metal Exchange surged as much as 5.6 percent to $7,600 a metric ton, the highest intraday price since Jan. 20. The Feb. 27 quake disrupted supply of copper from the world’s biggest producer.
The British pound dropped as much as 3 percent against the dollar, slumping below $1.50 for the first time since May 8, while the euro sank 0.9 percent. A stronger dollar may reduce the appeal of commodities as a hedge against inflation.
To contact the reporter on this story: Ayesha Daya at adaya1@bloomberg.net
