x Abu Dhabi, UAETuesday 25 July 2017

Price of crude slips for fourth day

Pulled in opposite directions by currency movements and market fundamentals, crude has moved with a weakening yen and euro to its lowest level since mid-October.

Pulled in opposite directions by currency movements and market fundamentals, crude has moved with a weakening yen and euro to its lowest level since mid-October. Crude slid towards US$74 per barrel yesterday, falling for a fourth consecutive day as the US dollar strengthened against other major currencies. Crude shrugged off better-than-forecast figures on US jobs, even though a long-awaited rebound in employment in the world's biggest economy should signal recovering fuel demand.

Last Friday's US jobs report, however, was itself the main driver of the dollar's move upwards yesterday, as it fuelled speculation that the US Federal Reserve might start raising interest rates. Last month, in its latest policy statement, the Fed cited "low rates of resource utilisation" - a factor embodied by stubbornly high US unemployment - as a key reason for not raising rates. The 11,000 US jobs shed last month were the least in any month since the recession began two years ago, allowing US unemployment to retreat to 10 per cent from the 26-year high of 10.2 per cent reached in October.

The dollar responded by climbing to a five-week high against a currency basket yesterday, extending a rally that started on Friday after the release of the labour report. That made dollar-denominated commodities such as oil more expensive for holders of other currencies. "A stronger dollar is automatically bad for commodities and can put oil under pressure," said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich.

"We may see some weakness in the short term," said Angelos Damaskos, the manager of the investment fund Junior Oils Trust. "The oil price has been pushed up by financial demand. A lot of investors have been buying against the dollar." Crude dipped as low as $74.04 in early trading yesterday on the New York Mercantile Exchange, more than 9 per cent off its $82 per barrel high for the year on October 21. Analysts were divided over whether oil would now continue to fall or would respond to improving supply and demand fundamentals by resuming its previous march upwards from $32 in February.

"A consistent series of reports in the US and China will form a base for oil to appreciate," said Paul Harris, the head of natural resources risk management at the Bank of Ireland in Dublin. Chinese oil imports rose last month to the second-highest level on record, reflecting stronger industrial output. New data are expected this week. Putting the case for the bears, Sucden Research of London said high levels of crude inventories and views that OPEC would keep output quotas unchanged at its ministerial meeting this month did not support higher crude prices.

@Email:tcarlisle@thenational.ae