Crude Falls for Second Day as Dollar Gains West Texas Intermediate crude fell for a second day as the dollar strengthened against a basket of other major currencies and Egypt’s interim leader pushed ahead with a timeline for a new government. Prices dropped as much as 0.8 percent as the Dollar Index climbed to a three-year high. Egypt’s parliamentary and presidential elections, unveiled in a 33-article constitutional declaration late yesterday, came as the fatal shooting of more than 50 Islamists by the army threatened the transition. About 10 percent of Middle East crude moves through the Suez Canal and the Suez-Mediterranean Pipeline, both controlled by Egypt. “The stronger dollar is detrimental to commodity prices,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “The oil price is elevated. Without any additional disruptions in Egypt, prices will probably come back down.” WTI for August delivery slid 26 cents, or 0.3 percent, to $102.88 a barrel at 10:47 a.m. on the New York Mercantile Exchange. The volume of all futures traded was 21 percent above the 100-day average for the time of day. Brent for August settlement fell 7 cents to $107.36 a barrel on the London-based ICE Futures Europe exchange. Volume was 5.9 percent below the 100-day average. The Dollar Index, which measures the greenback against six other major currencies including the euro, climbed as much as 0.6 percent to 84.72, the highest intraday level since July 6, 2010. A strong dollar reduces oil’s appeal as an investment alternative. “The dollar is rising and it’s putting pressure on oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Even though there are casualties in Egypt, things are relatively quiet at the Suez Canal. Shipping is not interrupted.” The planned elections in Egypt sought to chart a course for a nation whose unrest and economic stagnation since the 2011 revolution that toppled Hosni Mubarak was compounded under Mohamed Mursi, Egypt’s first freely elected civilian president, who was ousted by the military July 3. WTI jumped 6.9 percent last week, the biggest increase since the five days ended Feb. 25, 2011, amid concern that unrest in Egypt will threat oil supplies. Prices closed at $103.22 on July 5, a 14-month high. The majority of crude oil transiting the Suez Canal travels northbound toward markets in the Mediterranean and North America. A combined 2.24 million barrels a day of oil were shipped from the Red Sea to Europe and North America in 2011 via the Suez Canal and the Suez-Mediterranean, according to the U.S. Energy Information Administration. About 37 vessels with 2.22 million net tonnages moved through the Suez Canal in both directions today, compared with 55 vessels with 2.76 million tonnages on July 8 and 39 ships with 1.95 tonnages on July 7, according to the Suez Canal Authority. “As long as we don’t see civil war breaking out in Egypt, I think the geopolitical risk has already been priced in,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. WTI’s 14-day relative strength index closed above 70 for a second day yesterday, data compiled by Bloomberg showed. Some investors start selling contracts when the reading crosses that threshold, seen as a sign that speculative buying has driven prices unreasonably high. U.S. crude supplies probably fell to a four-month low last week as refiners boosted gasoline production to meet rising demand in the peak season for driving, a Bloomberg survey showed. Stockpiles decreased 3.1 million barrels to 380.7 million in the week ended July 5, based on the median of 10 analyst estimates before a report tomorrow from the Energy Information Administration. That would be the lowest level since Feb. 22.
Posted on: Tue, 09 Jul 2013 15:15:19 +0000
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