PR: Oil prices decline after US dollar gains against euro
Oil prices declined today as rumours that China may soon introduce further monetary policy tightening resurfaced.
Last week it was reported that China was mulling interest rate hikes in addition to the recent increase in reserve requirements for banks in the latest attempt to curb inflation, which reached 4.4% in October.
Higher interest rates would likely lead to a decline in economic activity and crude oil demand from the world’s second largest energy consumer.
Meanwhile, bond yields in the euro zone kept climbing, hitting the euro and further boosting the US dollar, which also gained from the talks about more interest rate hikes in China.
A stronger American currency makes the dollar denominated crude more expensive for holders of other currencies, denting demand.
Traders are now looking to US crude oil inventories data for signs of the strength of energy demand in the US.
US light, sweet crude for January delivery declined to US$84.78/barrel, while February crude fell to US$85.33/barrel on the New York Mercantile Exchange (NYMEX).
On the ICE Exchange, January Brent Crude last traded at US$86.75/barrel. Brent for February delivery stood at US$86.81/barrel.
Supermajors BP (LON:BP) and Shell (LON:RDSB) declined marginally, while Tullow oil (LON:TLW) dropped 1%.
Cairn Energy (LON:CNE) did better, advancing 2.5%.
BG Group (LON:BG) followed, posting a small gain.
Amec (LON:AMEC) lost 1.3%, while fellow oil and gas engineering firm Petrofac (LON:PFC) stood just above the opening level.
JKX Oil & Gas (LON:JKX) and Salamander Energy (LON:SMDR) posted small gains, while other midcaps declined.
Heritage Oil (LON:HOIL) and Premier Oil (LON:PMO) were sitting just below the opening levels.
Melrose Resources (LON:MRS) and Soco International (LON:SIA) retreated 3.2% and 1% respectively.
North Sea oilfield developer Xcite Energy (LON:XEL) and Africa and FSU operating oil and gas exploration and production company Victoria Oil & Gas (LON:VOG) were among the top performing small caps, tacking on 8% and 5.5% respectively.
