LONDON (Dow Jones)–Crude-oil futures fell nearly $2 Tuesday, pressured by a strong dollar and profit-taking from Monday’s surge to two-month highs.
| ”The market is a bit tired, and with the dollar showing…strength, the short-term longs have been taking a bit of profit,” said Andy Riddell, head of retail derivatives at London Capital Group. |
| At 1139 GMT, the front-month April Brent contract on London’s ICE futures exchange was down $1.68 at $78.78 a barrel. |
| The front-month April contract on the New York Mercantile Exchange was trading $1.63 lower at $80.24 a barrel. |
| The ICE’s gasoil contract for March delivery was down $7.75 at $641.50 a metric ton, while Nymex gasoline for April delivery was down 4.92 cents at 224 cents a gallon. |
| ”With little new oil news to chew, it will be left to equities and the dollar to drive again the oil markets until a new reality check can be done later tonight and tomorrow with the weekly [inventory] statistics,” said Olivier Jakob, managing director of Switzerland-based consultancy Petromatrix. |
| The dollar strengthened against several major currencies, including the euro and sterling, Tuesday, which put pressure on crude prices. Dollar-denominated crude oil tends to fall when the dollar rises because it makes the commodity more expensive for holders of other currencies. |
| In the absence of major fundamental or macroeconomic news, the market paused to assess whether the recent price rally–by nearly 6% in March–could continue. |
| According to Andrey Kryuchenkov, vice president of commodities research at VTB Capital in London, the prospect of tightening fundamentals will underpin prices in the near term. |
| ”The U.S. economy is on the road to recovery, and we expect a gradual pickup in the U.S. energy demand ahead of the U.S. summer driving season, while OPEC’s dedication to keep supplies unchanged will help to gradually reduce swollen OECD stockpiles,” Kryuchenkov said. |
| But Peter Beutel of Cameron Hanover said the recent rally wasn’t justified by fundamentals, adding that prices were overbought Monday. |
| Some participants think “oil supply and demand might not be strong enough for these higher prices,” Beutel said. “We have to agree.” |
| Technical charts for Nymex April crude backed a move up to the $84.09-$84.25 a barrel range, said technical analysts at Barclays Capital. “However, into here, we look for renewed stalling, as…open interest is fast approaching previous peaks, indicating that bullish optimism is once again reaching extreme,” the analysts added. |
| Looking ahead, participants are awaiting the U.S. Energy Information Administration’s widely followed short-term energy outlook, due at 1700 GMT Tuesday. |
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