Oil prices trading steady around $78, has support at $77

Oil prices are trading steady at around the $78 dollar mark as the easing of a cold snap in the northern hemisphere dents demand for heating fuel including oil. A strengthening US dollar also weighed on demand as it makes crude oil prices, which are traded in US dollars, more expensive to those who hold weaker currencies.

In afternoon trade, New York’s main contract, US Light sweet crude oil futures for February delivery, was down 78 cents to $78.24 dollars a barrel after surging 1.02 dollars in US trade overnight, while in London, Brent North Sea crude oil futures for delivery in March dipped 70 cents to $76.93.

“Oil is pulling back and it’s part of the volatility,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore. “The cold weather is ending in the northern hemisphere,” he said.

He added that a closely watched weekly report on US energy stockpiles is expected to show an increase, which would indicate weaker demand in the world’s biggest energy consuming nation. The stockpiles report by the US Department of Energy is due for release on Thursday.

“Fundamentals are weighing on prices at this point. Investors and traders lack the conviction at this time to push prices much higher,” Shum said. “The US dollar has gained strength… versus the euro and the yen so that’s consistent with oil coming down a bit.”

Shum said he expects pricing support at $77 a barrel in the near term.

“When prices approach $77 then many investors will look at that pricing level as a buying opportunity,” he said. “When we get above 80 dollars, investors are concerned about fundamentals.”

Tags:  oil prices, oil trading, support