Crude Oil Rises for First Time in Six Days as Dollar Weakens, Stocks Gain
Oil rose for the first time in six days as the dollar weakened and advancing equities reaffirmed confidence the global recovery will stimulate fuel demand.
Crude reversed earlier losses of as much as 1.5 percent as European equity indexes climbed the most in a month. The industry-funded American Petroleum Institute will release its weekly report on fuel supply and demand levels tomorrow, a day later than normal because of yesterday’s Independence Day holiday in the U.S.
“Risk appetite is improving with higher equities,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “There’s a close correlation between crude and the dollar, and that explains the small rebound today, but I’d be careful about buying here as we’ll likely remain in a narrow trading range.”
The contract for August delivery gained as much as $1.08, or 1.5 percent, to $73.22 a barrel in electronic trading on the New York Mercantile Exchange, and traded for $73.16 at 1:34 p.m. London time. It earlier dropped as low as $71.09 a barrel. Brent crude for August was at $72.62 a barrel, $1.15 higher, on London’s ICE Futures Europe exchange.
Floor trading was closed yesterday on the Nymex for the U.S. Independence Day holiday and electronic trades are booked today for settlement purposes.
Before today, the market had been in its longest pullback since a six-day drop through May 18. Crude oil retreated 8.5 percent in the six days through yesterday, bringing its decline this year to 9 percent.
Stocks, Euro
European stocks gained, ending the longest losing streak in a year for the Stoxx Europe 600 Index, on speculation the decline in equities has overrun the outlook for company earnings. Asian shares and U.S. index futures rose.
The euro rose 0.5 percent against the dollar to $1.2598. A weaker U.S. currency makes dollar-priced assets such as crude cheaper for foreign investors, and attractive for protecting against inflation.
“It’s very likely that the market will take cue from the dollar this week,” said Clarence Chu, a trader at Hudson Capital Energy in Singapore. “In the Asian hours and even the earlier London hours, the market seems to have a higher correlation between crude and the dollar.”
Oil’s 50-day moving average crossed below its 200-day mean at the end of last month for the first time since 2008, when crude sustained a 53 percent collapse as the financial crisis slashed demand around the world. This “dead cross” pattern may precede a drop to $54 a barrel should prices break through a $68 resistance level, according to analysts at Societe Generale SA.
Barclays Capital’s technical analysts said that prices are heading toward the low of $58.32 a barrel reached on July 13 last year.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
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