West Texas Intermediate declined for the first time in five days as the dollar advanced against the currencies of U.S. trading partners.
Futures dropped 0.6 percent as the Dollar Index (DXY), which tracks the currency against six others, rose for the seventh time in nine days, reducing the appeal of raw materials priced in dollars. The Standard & Poor’s GSCI Index of 24 commodities fell 0.6 percent. Traders awaited a report on inventories and Federal Reserve Chairman Ben S. Bernanke’s testimony before Congress, both scheduled for tomorrow.
“The stronger dollar is hitting commodities across the board,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “We should continue to see commodities come under pressure as the dollar climbs.”
WTI oil for June delivery fell 55 cents to settle at $96.16 a barrel on the New York Mercantile Exchange. The contract, which expired today, rose to $96.71 yesterday, the highest close since April 2. The more active July WTI futures slipped 75 cents, or 0.8 percent, to $96.18. Volume for all contracts was 12 percent below the 100-day average for the time of day.
Prices were little changed after the American Petroleum Institute reported that U.S. inventories gained 532,000 barrels to 390.7 million. The July contract fell 98 cents to $95.95 a barrel in electronic trading at 4:36 p.m. The contract traded at $95.98 before the report was released at 4:30 p.m.
Brent crude for July settlement declined 89 cents, or 0.8 percent, to end the session at $103.91 a barrel on the London-based ICE Futures Europe exchange. Volume for all contracts was 39 percent lower than the 100-day average.
The European benchmark grade was at a premium of $7.73 to WTI for the same month, down from $7.87 yesterday. The spread was a record $25.53 on Nov. 15.
The Dollar Index rose as much as 0.6 percent to 84.20. On May 17, the index reached 84.371, the most since July 2010. The U.S. currency climbed as much as 0.4 percent against the euro.
The Fed said May 1 it will keep buying bonds at the monthly pace of $85 billion, while standing ready to raise or lower purchases as conditions evolve. The Bank of Japan and Bank of England have also purchased assets to bolster economic growth while the European Central Bank cut interest rates to a record low on May 2.
Federal Reserve Bank of New York President William C. Dudley said in prepared remarks for a speech today in New York that he has not decided whether the Fed’s next move should be to enlarge or shrink its bond buying program. Earlier today, St. Louis Fed President James Bullard said the central bank should continue bond buying because it’s the best available option for policy makers to boost growth.
“The Fed was the first central bank to implement unconventional stimulus and now others are catching up,” O’Grady said. “The dollar weakened first and now other currencies are following.”
Bernanke will speak before a congressional committee tomorrow, the same day that minutes from the Fed’s last meeting are released.
The Energy Information Administration may report tomorrow that U.S. crude inventories fell by 1 million barrels last week, according to the median of 11 analyst estimates in a Bloomberg survey. Stockpiles climbed to 395.5 million in the week ended May 3, the most since 1931.
Supplies of gasoline probably fell by 300,000 barrels while stockpiles of distillate fuel, a category that includes heating oil and diesel, gained 1 million barrels, the survey showed.
Gasoline for June delivery dropped 5.98 cents, or 2.1 percent, to settle at $2.8458 a gallon on the Nymex. Volume was 21 percent above the 100-day average for the time of day.
The EIA, the Energy Department’s statistical arm, is scheduled to release its weekly petroleum report at 10:30 a.m. tomorrow in Washington.
“The market is balancing a lot of factors right now,” said Phil Flynn, a senior market analyst for Price Futures Group in Chicago. “We have both inventories and Ben Bernanke tomorrow and it’s impossible to know what will be more important. We will have to wait and see what produces the bigger surprise.”
Implied volatility for at-the-money WTI options expiring in July was 20.6 percent, compared with 20.7 yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 456,218 contracts as of 4:35 p.m. It totaled 632,229 contracts in the previous session, 8.4 percent above the three-month average. Open interest was 1.74 million contracts.
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