Oil fell for a second day as the dollar strengthened and an industry-funded report showed an increase in US crude supplies, fanning concern that demand in the world’s biggest energy user is slow to recover.
Crude oil dropped yesterday after the US currency rose against the euro amid concern that the Greek financial crisis will trigger a default on debts by other European countries. The American Petroleum Institute said US crude inventories rose 6.5 million barrels last week. An Energy Department report today is forecast to show supplies climbed 2 million barrels.
"The API data had a pretty big rise in stockpiles," said Ben Westmore, a minerals and energy economist at National Australia Bank. "The recovery does look like it’s becoming entrenched but things are still quite slow."
Crude oil for April delivery fell as much as 44 cents, or 0.5 per cent, to $US81.05 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $US81.23. Yesterday, the contract fell 38 cents to settle at $US81.49.
The dollar traded at $US1.3593 per euro from $US1.3602 yesterday. A stronger US currency reduces the appeal of commodities as alternative investment.
"The sovereign debt issues in Greece is having two impacts on the oil market," Westmore said. "It's dampening the demand outlook, and it’s causing a weakening in the euro and a fall in the oil price due to the strong US currency."
Energy department
The Energy Department report will probably show that US inventories of crude oil rose, according to the median of 17 analyst responses in a Bloomberg News survey. The department is scheduled to release its Weekly Petroleum Status Report at 10:30am in Washington.
Saudi Arabia had 4 million barrels a day of spare oil output capacity that can be absorbed into the market when global energy consumption recovers, the head of the kingdom’s state-owned oil company said yesterday.
"Oil supply will decline if there is no investment, so that 4 million could be absorbed by demand alone," said Khalid al-Falih, chief executive officer of the Saudi Arabian Oil Co., in a speech at a Cambridge Energy Research Associates conference in Houston.
The kingdom, the world’s largest exporter, raised output by 100,000 barrels a day to 8.25 million in February, the highest level since December 2008, a Bloomberg News survey of oil companies, producers and analysts showed last month. Saudi Arabia can produce as much as 12.5 million barrels a day, al- Falih said.
OPEC meeting
The Organization of Petroleum Exporting Countries will meet March 17 in Vienna to review policies, group president Germanico Pinto said in a statement yesterday. The group last gathered Dec. 22 and left output quotas unchanged for a fourth consecutive meeting.
Pinto, who is also Ecuador’s minister of natural non-renewable resources, is seeking to reduce price speculation and volatility during his term as leader of the oil cartel.
"The fact that there’s volatility produces difficulties in the markets and in defining a long-term strategy for public investment in the oil industry," he said.
Brent crude oil for April delivery fell as much as 27 cents, or 0.3 per cent, to $US79.64 a barrel on the London-based ICE Futures Europe exchange. It was at $US79.77 a barrel. Yesterday it dropped 56 cents, or 0.7 per cent, to settle at $US79.91 a barrel.
