BLBG: Oil Drops for Second Day as Dollar Gains, China Equities Fall
By Rachel Graham
March 15 (Bloomberg) -- Crude oil declined for a second day as the dollar gained, curbing demand for most commodities as a currency hedge, and before this week’s OPEC meeting in Vienna.
The dollar index, which tracks the U.S. currency against six others, advanced for the first time in four days. Chinese equities fell, pushing the Shanghai Composite Index to close at the lowest level in five weeks.
“The dollar has moved back on foot on falls in Asian stocks,” said Paul Harris, head of natural resources risk management at the Bank of Ireland in Dublin. “Oil has dipped as a result.”
Crude oil for April delivery fell as much as 80 cents, or 1 percent, to $80.44 a barrel in electronic trading on the New York Mercantile Exchange and traded at $80.99 as of 11:22 a.m. London time. Brent crude oil for May settlement, the most active contract on the London-based ICE Futures Europe exchange, dropped 20 cents, or 0.3 percent, to $79.76 a barrel.
The Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil, meets for the first time this year on March 17.
Iran, the second-biggest producer in the group, wants to keep output unchanged because there is no sign of growing demand, Agence France-Presse reported, citing the country’s oil minister.
“There is no increase in demand in the market and supplies have not decreased much,” Masoud Mir-Kazemi was quoted by AFP as telling reporters.
Compliance with Quotas
OPEC cut production quotas by a record 4.2 million barrels a day at the end of 2008 as demand plunged. Compliance with those quotas fell to 53 percent in February, OPEC said last week in its monthly report.
“OPEC members will be told to clean up on compliance,” said Hannes Loacker, a Raiffeisen Zentralbank Oesterreich analyst in Vienna. “Otherwise crude inventories will rise.”
Oil consumption may fall in the second quarter as heating oil use drops and before the U.S. driving season begins, when demand for gasoline is strongest, Loacker said.
OPEC will maintain existing quotas as prices hold above $80 a barrel and the group awaits further confirmation of a recovery in demand, according to a Bloomberg News survey.
Speculative net-long positions, or the difference between orders to buy and sell the commodity, rose 20 percent to 109,314 contracts in the week ended March 9, U.S. Commodity Futures Trading Commission data showed.
To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net
