Oil falls to near $85 as dollar gains on euro. Oil falls to near $85 in Europe as dollar gains, traders eye US crude inventory reports
Oil prices slipped to near $85 a barrel Tuesday as the dollar continued to gain on the euro and traders looked to U.S. supply reports for clues about the strength of demand for crude.
By early afternoon in Europe, benchmark oil for January delivery was down 45 cents to $85.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.97 to settle at $85.73 on Monday.
«Crude oil prices pared some of (Monday’s) gains as investors were prompted to some profit-taking, tracking weaker global equity markets and a strong U.S. dollar,» said analysts at Sucden Financial Research in London.
Crude inventories likely fell 1.5 million barrels last week, according to analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute plans to announce its inventory numbers later Tuesday while the Energy Department’s Energy Information Administration reports its weekly supply data — the market benchmark — on Wednesday.
«We still see further upside for oil prices as a result of extended U.S. liquidity, strong emerging market demand, and a nascent fall in U.S. inventories albeit from high levels,» Citigroup said in a report.
Citi said it expects oil prices to average $88 during the next three months and $93 between six and 12 months from now.
The usual inverse correlation between the dollar and oil prices was back on track Tuesday after breaking the norm Monday. Oil normally falls as the dollar strengthens since crude becomes more expensive for investors with other currencies.
The euro fell to $1.3010 in European trading Tuesday from $1.3116 late Monday in New York, after briefly dipping below $1.30. The British pound was down to $1.5522 from $1.5565.
The weaker euro «tells us that markets are expecting further problems ahead and that investors may not be content until the ECB is more aggressive in actually buying some impaired and national debt from the countries that are most at risk, as opposed to lending money to national governments,» said a report from MF Global in New York.
In other Nymex trading in December contracts, heating oil fell 0.51 cent to $2.353 a gallon and gasoline dropped 1.16 cents to $2.273 a gallon. Natural gas added 1 cent to $4.22 per 1,000 cubic feet.
In London, Brent crude retreated 26 cents to $87.08 a barrel on the ICE Futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.