Oil price falls on dollar
Oil fell on Friday in post-holiday thin trade as ongoing concerns about a wider debt crisis in Europe, China’s inflation and tensions in Korea pushed up the dollar.
Investors are treading cautiously, waiting to see how Ireland’s bailout will pan out and if more European countries will seek financial help. China may also step up measures to curb accelerating inflation following a recent crackdown on commodity prices at the world’s second largest oil consumer.
The situation in the Korean peninsula remained tense as South Korea’s military reported on Friday that sounds of distant artillery fire were heard from within the North.
U.S. crude for January remained on track for a 2.5 percent weekly rise after posting the largest daily gain in four months on November 24 on positive U.S. economic data.
The contract fell 35 cents to $83.51 a barrel at 0656 GMT (1:36 a.m. ET) as the U.S. dollar strengthened. January ICE Brent dropped 62 cents to $85.48 a barrel.
The dollar index .DXY hit a new two-month high on Friday, helped by worries about euro zone debt problems and North Korea’s fresh warning against a U.S.-South Korean joint military exercises.
“Trade in currencies, equities and commodities are all very thin, but it could also be due to the fact that economic and (oil) inventories data are already factored in the market,” said David Taylor, a Sydney-based analyst at brokerage CMC Markets.
Oil prices are likely to stay rangebound between low and mid-$80s as the market keeps a close tab on the macroeconomic situation, focusing on euro-zone debts and inflation-fighting measures in China, he said.
The euro hovered near a two-month low against the dollar on persistent worries about a wider debt crisis in Europe.
“We know the IMF will back loans to Ireland but we don’t know how it will be implemented,” Taylor said, adding that the focus may also turn to Portugal’s debts as interest rates for its bonds have risen sharply.
China has intervened to control fast-rising consumer prices, raising widespread market talk of an impending interest rate rise, reinforced by an actual increase in banks’ required reserve ratios last Friday.
On Thursday, the country’s top economic planner said that a crackdown on commodity prices contributed to a widespread fall in futures in the last two weeks.
The country’s commodities exchanges have announced measures to raise margin requirements and widen daily price movement limits to curb speculation.
Separately, India has said it will step up crude imports by over 500,000 barrels per day (bpd) in the next fiscal year to feed new refineries and fill up storage tanks.
Shell said on Thursday it was restoring production of Nigerian crude oil after repairing a pipeline damaged by oil theft in Africa’s top exporter last week.
Source: Reuters