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Oil below $79 as fundamentals, firm dollar

LONDON - Oil extended its losses to ease below $79 a barrel on Tuesday, after a nearly 3 percent slump in the previous session amid a wider slide in commodities tied to a rebound in the US dollar.

Published: Tue 9 Oct 2007, 7:03 PM

Updated: Sat 4 Apr 2015, 11:24 PM

  • By
  • (Reuters)

US crude futures lost 38 cents to $78.64 a barrel by 1200 GMT. London Brent crude was 70 cents down at $75.88.

Analysts said fundamentals factors, including weak demand from US refiners in the midst of seasonal maintenance as well as weakness in product demand with the end of the summer gasoline season, were weighing on oil.

“You are also looking at the end of the hurricane season. So whatever bets were placed on a final hurricane are probably coming off,” said BNP Paribas analyst Harry Tchlinguirian.

The Atlantic hurricane season, which runs through November, is yet to cause any major damage to oil or gas infrastructure.

“Markets remain preoccupied by the potential repercussions that a weakening US economy could have on oil demand,” said analysts at Barclays Capital, adding that a strengthening US dollar had magnified oil’s fall.

Other commodities such as gold and copper have also retreated in the face of a resurgent dollar.

Some investors had bought crude and commodities in recent weeks as a hedge against the weaker US dollar, which reached multi-year lows against other major currencies following a cut in US interest rates last month.

But the dollar has recovered this week as expectations of a further cut in rates this month faded after a report late last week showed US jobs growth in September was the strongest since May, although investors expect a cut by end of the year.

The US currency firmed against the euro on Tuesday but slipped against the yen.

The slide in oil comes as concerns had begun to be expressed about high prices, which hit a record high of $83.90 on Sept. 20.

The new executive director of the International Energy Agency, Nabuo Tanaka, told Reuters on Monday that high prices would eventually hurt consuming nations’ economies but stopped short of calling on OPEC to further increase output.

OPEC members last month agreed to increase oil production by 500,000 barrels per day starting Nov. 1.

Attention later this week will turn to US data, expected to show a 600,000-barrel build in crude stocks, a 600,000-barrel draw in distillates and a 100,000-barrel fall in gasoline inventories, a preliminary Reuters poll showed.

The weekly data will be released on Thursday, a day later than usual, due to the Columbus Day holiday.


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