Crude Oil Futures Plummet to Two-Month Low on Strengthening Dollar

Strategic Insights -

The strength of the US economy, as evidenced by a 1.3% increase in November retail sales, led to a strengthening of the dollar, causing crude oil futures to sink to a two-month low. The dollar's value reached a two-month high against the euro, making crude more expensive to hold. This comes as the US economy is showing signs of improvement, with a forecast by the Federal Reserve indicating a potential interest rate hike, which would boost the dollar further.

Key Takeaways:

  • Crude oil futures hit a two-month low as the dollar strengthened, with light, sweet crude for January delivery trading 55 cents, or 0.8%, lower at $69.99 a barrel.
  • Brent crude on the ICE futures exchange traded 25 cents lower at $71.61 a barrel.
  • The dollar's value reached a two-month high against the euro, with a rate of $1.4616 to the euro, the highest since early October.
  • The Federal Reserve's forecast suggests a potential interest rate hike, which would further support the dollar.
  • Fuel inventories continue to grow, contributing to a massive surplus generated during the recession.
  • The International Energy Agency raised its forecast for global oil demand, but also increased its estimate for production outside the Organization of Petroleum Exporting Countries.
  • Analyst Phil Flynn warned that even with improved demand, a large supply must be worked out before prices will rise.
  • Front-month January reformulated gasoline blendstock (RBOB) traded 1.30 cents, or 0.7%, lower at $1.8221 a gallon, while January heating oil traded 5 points lower at $1.9024 a gallon.

Statistics:

  • Crude oil futures sank 55 cents, or 0.8%, to $69.99 a barrel.
  • Bret crude traded 25 cents lower at $71.61 a barrel.
  • The dollar reached a two-month high against the euro at $1.4616.
  • Fuel inventories continue to grow, contributing to a massive surplus generated during the recession.
  • The International Energy Agency forecasts a 1.5 million barrel increase in global oil demand next year.
  • The IEA also raised its forecast for production outside the Organization of Petroleum Exporting Countries by 125,000 barrels a day.

Sources:

  • "Crude oil futures sink to a 2-month low" by Brian Baskin, Dow Jones Newswires.
  • "Dow Jones Commodities News via Comtex"
  • "Dow Jones Newswires 12-11-09 1032ET Copyright (c) 2009 Dow Jones & Company, Inc."