Crude down $1/bbl on stronger US dollar, Europe debt woes

19 May 2010 08:55  [Source: ICIS news]

SINGAPORE (ICIS news)--Crude futures fell by more than $1/bbl on Wednesday, pushing US crude to a new seven-month low, amid a stronger US dollar and worries over high inventories, European debt, and tighter financial market regulations.

At 07:15 GMT, June NYMEX light sweet crude futures were down $1.12/bbl at $68.29/bbl (€56/bbl), after hitting an intra-day low of $67.90/bbl - its weakest level since late September 2009.

July Brent on London’s ICE futures, meanwhile, slipped 79 cents/bbl to $73.64/bbl. The North Sea benchmark hit a session low of $73.21/bbl, its lowest level seen since late February this year.

The US dollar gained against the euro and other leading currencies, while equity markets fell amid growing concerns about the strength of the global economy, particularly those of the debt-ridden nations of Europe.

Germany’s plans to ban naked short-selling of shares had spurred concerns about imposition of tighter regulations on the global financial system, pushing the euro to a four-year low against the US dollar.

US inventory data from the American Petroleum Institute (API), meanwhile, revealed a surprise 1m bbl build in gasoline stocks and another record build in crude stocks at the Cushing terminal in Oklahoma, further depressing the oil markets.

Overall API data showed an unexpected decline in crude stocks of some 800,000 bbls. However, the Cushing stock’s jump to a new high of 37.99m barrels offset the overall fall, as the landlocked terminal is the delivery point of benchmark NYMEX light sweet crude (WTI).

The build-up of stocks at Cushing had pushed WTI lower relative to Brent since mid April.

Traders now await the more closely followed US Government data from the Energy Information Administration (EIA), due for release later on Wednesday.

Crude prices have tumbled since early May, when they hit their highest levels since October 2008.

NYMEX light sweet crude futures have tumbled around 22% from an intra-day high of $87.15/bbl hit on 3 May, while ICE Brent futures were down roughly 18% from an intra day high of $89.58/bbl over the same period.

($1 = €0.82)

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By: James Dennis
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