Wednesday, March 10, 2010

DJ OIL FUTURES: Crude Oil Trends Down On Stronger Dollar

DJ OIL FUTURES: Crude Oil Trends Down On Stronger Dollar

(Recasts top.)

By Edward Welsch

Crude oil settled slightly lower as the stronger dollar
weighed on prices,though futures hovered near their highest
point in eight weeks, with the front-month contract holding
above $80 a barrel for the fifth day in a row.

Oil remained near the top of its recent trading range as
traders bet that seasonal factors would sustain prices, as
the return of spring usually means supply is reduced as
refineries temporarily shut down for maintenance and demand
for gasoline increases ahead of the summer driving season.

Analysts, however, warned there were few signs of real
recovery in oil demand, while supplies remained at their
highest levels in decades.

Light, sweet crude for April delivery settled down
38 cents, or 0.5%, at $81.49 on the New York Mercantile
Exchange. Brent crude on the ICE futures exchange closed
down 56 cents, or 0.7%, at $79.91 a barrel.

Oil prices declined nearly $2 a barrel in overnight
trading Tuesday as losses in overseas equity markets,
a lower open for U.S. stocks and a stronger dollar against
the euro weighed on dollar-denominated oil prices.

But a rally in U.S. technology stocks after Cisco
Systems Inc. (CSCO)unveiled a new router Tuesday led the
broader equity market higher during the day, helping crude
oil trim its losses.

Crude oil has failed to hold five streaks above $80 a
barrel over the last six months, and analysts viewed the
latest run above that level with some skepticism.

"I think the bulls are making an extreme push with the
understanding that they're up against the top of the
current range, so it's now or never for them," said
Stephen Schork, editor of the oil and gas newsletter
The Schork Report. "They're thinking, 'If we don't push
it up to $85 range it will go down to $70-$75,'" he said.

There was little reaction in the oil markets to the
U.S. Department of Energy's monthly energy outlook
published midday Tuesday. Although the agency raised its
2010 oil consumption outlook to 1.5 million barrels per
day from 1.2 million and forecast prices above $80 per
barrel, it projected that average prices at the pump would
remain below $3 a gallon through 2011.

"The market didn't know how to react," Schork said.
"[The report] said we're likely looking at $80 oil for the
foreseeable future, while retail gasoline prices don't
reflect $80 oil."

Energy analyst Jim Ritterbusch of Ritterbusch
& Associates told clients in a note Tuesday that the higher
market reflected traders betting too heavily and too early
on seasonal strength in gasoline prices.

"Just as the gasoline market has led the complex higher
for more than 3 weeks, further price weakness is almost
certain to be led by the RBOB," he wrote. "Some guidance
in this regard should be forthcoming during the next couple
of sessions from the [American Petroleum Institute and
U.S. Energy Information Administration] stats as well as
financial developments capable of forcing a sharp move in
either the stock market or dollar."

Front-month April reformulated gasoline blendstock,
or RBOB, settled down 2.89 cents, or 1.3%, to $2.2603 a
gallon. April heating oil settled down 1.57 cents, or
0.8%, to $2.0898 a gallon.

The American Petroleum Institute, a trade group,
reported Tuesday afternoon that crude oil stocks rose by
6.5 million barrels last week, gasoline stocks declined
3.2 million barrels, distillate stocks include diesel and
heating oil declined 2.8 million barrels and refinery
utilization declined 0.7 percentage point to 80.9%.

Analysts surveyed by Dow Jones Newswires forecast that
crude oil stocks rose 1.7 million barrels last week while
gasoline inventories rose by 100,000 barrels. Distillate
stocks are expected to have fallen by 700,000 barrels.
Refinery utilization rates are seen having risen
0.1 percentage point to 82% of capacity.

Front-month crude oil prices declined slightly to
$81.45 a barrel in after-market electronic trading after
the API data was released, while front-month heating oil
and distillates both rose a fraction of a cent.

The U.S. Energy Information Administration will publish
its data Wednesday morning.

More information on settlements and highs and lows for
futures on Nymex and ICE platforms can be found by searching
for the following headlines:

Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close

-By Edward Welsch, Dow Jones Newswires; 613-237-0669;

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