Crude oil fell below $70 a barrel in New York as the dollar rose, limiting investor demand for commodities as a hedge against inflation.
Oil declined for a third day as the dollar gained versus 15 of the 16 major currencies on speculation leaders from Brazil, Russia, India and China meeting today to discuss the financial crisis will signal support for the dollar. Asian stock markets fell, eroding optimism that fuel demand may increase.
“The dollar is an important influence on the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd in Sydney. “Equity markets are off as well and we’re seeing some concern that these prices are becoming overextended.”
Crude oil for July delivery fell as much as 72 cents, or 1 per cent, to $69.90 a barrel in electronic trading on the New York Mercantile Exchange. It was at $70.08 a barrel Singapore time. Yesterday, it dropped $1.42, or 2 per cent, to settle at $70.62 a barrel. Oil reached $73.23 on June 11, the highest in seven months.
Asian equities declined for a second day after a report yesterday showed that manufacturing in New York fell. The MSCI Asia Pacific Index sank 2.2 per cent to 101.30 as in Tokyo. Japan’s Nikkei 225 Stock Average dropped 2.6 per cent to 9,781.30 as the central bank kept the overnight lending rate unchanged at 0.1 per cent today.
Yesterday’s global slide in equities dragged down the Standard & Poor’s 500 Index from a seven-month high.
More From This Section
The S&P 500, which climbed 40 per cent from a 12-year low on March 9, decreased 2.4 per cent to 923.72. The Dow Jones Industrial Average tumbled 187.13, or 2.1 per cent, to 8,612.13.
“Oil fell under pressure today from a weakening equities market and a pop in the dollar,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in a June 15 note. “If the stock market pulls back further and the dollar rallies back to $1.35 a euro, oil will fall back to the mid-$60 range.”
The yen and dollar strengthened against higher-yielding currencies on speculation a decline in stocks will spur demand for safer assets.
The dollar gained to $1.3767 per euro from $1.3803 yesterday, when it strengthened 1.5 per cent.
US crude oil inventories probably fell in the week ended June 12, as refiners ramped up production and boosted stockpiles of gasoline and heating oil, a Bloomberg News survey showed.
Crude-oil supplies probably dropped 2 million barrels last week from 361.6 million barrels the previous week, according to the median of five estimates by analysts before an Energy Department report tomorrow. All five forecast a drop.
Gasoline supplies probably rose 550,000 barrels in the week ended June 12 from 201.6 million the previous week. All of those surveyed said supplies climbed. Stockpiles during the same week last year fell 1.2 million barrels amid the peak motor fuel demand season in the US.
Brent crude for August delivery fell as much as 69 cents, or 1 percent, to $69.55 a barrel on London’s ICE Futures Europe exchange. The contract lost $1.56, or 2.2 per cent, yesterday to $70.24 a barrel. The July future expired yesterday at $69.44 a barrel.