Oil price trading near $67 on strong equities

Oil prices held steady, trading around $67 a barrel on Tuesday after climbing more than 1 percent a day ago, boosted by strong equities markets and Iran’s missile tests, but gains were moderated by expected builds in U.S. fuel stocks.

“Crude will continue to move according to the stock markets and inversely to the dollar, which will remain weak,” said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo. “People have been a bit shaken by the big drop in oil prices last week, back to back drops, following a stable market which has been trading within a $10 range for the past couple of months,” he added.

Prices slid more than $8 in the past two weeks to just above $65 on Friday, a near two-month low, on doubts over energy demand given weak U.S. economic data and high crude inventories. The recovery this week has taken support from Iran test firing a type of missile which a commander said could reach any regional target.

But analysts said short term fundamentals remain weak, with US crude and oil products stocks set to show sustained increases in the latest week and as refiners in the world’s largest oil consumer prepare for maintenance ahead of winter.

“The problem is that the oil market is now in a shoulder period of low demand before seasonal demand picks up in winter,” said Nunan, though he added fund managers will continue to support the oil and commodities markets as mid-to-long term fundamentals look firm as the economy recovers.

Tags:  oil prices