Crude Futures Fall as Stable Dollar and Oil Surplus Trigger Selloff

Strategic Insights -

Oil prices extended a decline on Monday, with crude futures falling 0.5% as a stable dollar and a stubborn oil surplus contributed to the selloff. The dollar's stabilization against the euro, albeit near a 2009 low, has investors uncertain about the currency's trajectory, leading some to seek refuge in dollar-denominated commodities like oil. Meanwhile, oil supplies remain bloated worldwide, making a reduction in the surplus dependent on unpredictable factors like China's growth rate or a cold winter in the US Northeast.

Key Takeaways:

  • Crude futures fell 0.5% to $68.93 a barrel, with Brent crude trading 25 cents lower at $67.44 a barrel, due to a stable dollar and a stubborn oil surplus.
  • The dollar's stabilization against the euro has investors uncertain about the currency's trajectory, leading some to seek refuge in dollar-denominated commodities like oil.
  • Oil supplies remain bloated worldwide, with 36 cents, or 0.5%, decrease in light, sweet crude for October delivery, attributed to the dollar's stabilization.
  • Oil's move lower was triggered by the dollar's stabilization, which has made investors uncertain about the effects of inflation.
  • Oil inventories are still bloated worldwide, and any reduction in the surplus depends on unpredictable factors like China's growth rate or a cold winter in the US Northeast.
  • Few see oil prices dropping much further this week, with the slow economic recovery creating a floor around $65 a barrel.
  • Analysts like Addison Armstrong and Ed Meier suggest that oil prices will likely continue to see sideways trading range markets for a little while longer.

Statistics:

  • Crude futures fell 0.5% to $68.93 a barrel.
  • Brent crude traded 25 cents lower at $67.44 a barrel.
  • Light sweet crude for October delivery decreased by 36 cents or 0.5%.
  • The euro was recently at $1.4565, nearly unchanged.
  • Oil supplies remain bloated worldwide, with a large drop in US oil inventories last week, but an increase in fuel stockpiles, meaning that supplies were little changed overall.

Sources:

  • Dow Jones Commodities News via Comtex, Sep 14, 2009
  • Tradition Energy, Stamford, Conn., quoted Addison Armstrong
  • MF Global, quoted Ed Meier
  • Brian Baskin, Dow Jones Newswires, 212-416-2453, brian.baskin@dowjones.com
  • Dow Jones & Company, Inc.