Oil falls below $94 amid stronger US dollar

Oil prices dropped below $94 a barrel Friday amid a stronger dollar and renewed concerns about demand for crude after mixed signs about the US economy.

By (AP)

Published: Fri 17 Jun 2011, 6:45 PM

Last updated: Tue 7 Apr 2015, 4:49 AM

By early afternoon in Europe, benchmark oil for July delivery was down $1.45 to $93.50 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 14 cents to settle at $94.95 on Thursday.

In London, Brent crude for August delivery was down $1.06 to $112.96 a barrel on the ICE Futures exchange.

Investors’ rising risk aversion — as Greece battled to avoid a debt default — helped boost the dollar, making commodities such as oil more expensive for investors with other currencies and pushing down oil prices.

After falling as low as $1.4128 earlier Friday, the euro recovered somewhat to trade at $1.4288.

In the past weeks, oil prices have been boosted partly by strong interest from speculators, many of whom now seem to be looking for safer investments.

“It therefore does not surprise us that the rise in risk aversion is currently putting so much pressure on oil prices,” said analysts at Commerzbank in Frankfurt. “In the climate of a greater perception of financial market and economic risks and given the present strength of the U.S. dollar, the price correction is likely to continue.”

On Thursday, a survey by the Federal Reserve Bank of Philadelphia found that manufacturing slowed in that region, one day after a similar report found that manufacturing was weakening in the New York area.

“Negative economic numbers could place more downward pressures on petroleum pricing,” Ritterbusch and Associates said. “We expect bearish rather than bullish surprises out of the economic releases.”

Other U.S. economic news was more positive. The pace of new home construction quickened last month and the number of people who applied for unemployment benefits fell last week to 414,000, more of an improvement than economists expected.

Investors will be eyeing the latest US consumer sentiment data later Friday.

Some analysts expect global crude supplies, deprived since February of Libya’s 1.6 million barrels per day of oil output, could struggle to meet growing demand from developing countries.

“If we’ve seen the bottom of the industrial slowdown, then tighter crude and product markets could return rapidly,” J.P. Morgan said in a report. “Risks of a price spike and increased volatility in the third quarter are arguably increased by the most recent price dip.”

Crude has fallen from $102 late last week and almost $115 in early May.

In other Nymex trading in July contracts, heating oil fell 2.48 cents to $2.979 a gallon while gasoline dropped 2.19 cents to $2.9275 a gallon. Natural gas futures slid 0.2 cent at $4.41 per 1,000 cubic feet.

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