Crude oil traded below $US80 a barrel in New York on concern that the pace of demand recovery in the US, the world’s largest energy consumer, wasn’t fast enough to justify recent price gains.
Oil declined 1.8 per cent yesterday as the US currency gained against the euro, curbing demand for commodities as an alternative investment. An Energy Department report tomorrow may show US crude supplies rose for a seventh week, according to a Bloomberg News survey of analysts. OPEC is forecast to keep output unchanged at a meeting tomorrow in Vienna.
"The recovery story has been priced into commodities," said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. "Some of the commodities, and oil is one, are getting up to high price levels relative to recent trading ranges and that has caused some investors to back off a bit."
Crude oil for April delivery traded at $US79.68 a barrel, down 12 cents, in electronic trading on the New York Mercantile Exchange. Yesterday, the contract lost $US1.44 to settle at $US79.80. Oil reached a two-month intraday high of $US83.16 a barrel on March 12.
The dollar traded at $US1.3661 per euro from $US1.3677 yesterday. The US currency strengthened while European finance ministers sparred over assistance for Greece, lowering investor appetite for higher-yielding assets.
"There seems to be a bit of lethargy about a lot of commodity markets at the moment," Moore said. "The investor drive seems to have faded a little bit."
Crude stockpiles
US crude oil stockpiles probably rose 750,000 barrels last week from 343 million, according to the median of six estimates before an Energy Department report.
"It’s not a particularly tight market at the present and we are now past the peak of the northern winter demand," Moore said. "We’re coming into the normally soft period for demand for crude."
The Organization of Petroleum Exporting Countries will maintain existing production at a meeting tomorrow as it awaits further confirmation of a recovery in demand, according to a Bloomberg News survey of analysts. The group, which pumps 40 per cent of the world’s oil, meets for the first time this year.
The US Federal Reserve will detail its outlook for interest rates today. The US is the world’s largest energy consumer. China’s Premier Wen Jiabao may take steps to cool the country’s expansion and economists predict India will raise interest rates after inflation in both nations accelerated to a 16-month high.
China will account for almost a third of global oil-demand growth this year, the International Energy Agency said last week as it raised its forecast for worldwide consumption this year by 70,000 barrels a day to 86.6 million. Economies outside the Organization for Economic Cooperation and Development will continue to lead a recovery in energy use, it said.
