Oil prices trading higher, eyes on the Dollar Index

Oil prices are trading higher back to near $72 a barrel on Thursday, as the US dollar’s (Dollar Index) surge to a three month high against the euro outweighed a surprisingly large fall in US crude oil and distillate stockpiles.

The US dollar climbed to 2 and a half months peak against the Euro, this drove the Dollar index to a fresh two-month high and rallied 0.7% in US trade. The dollar marched broadly higher as investors unwound short positions before the year-end, pulling crude back from the one-week peak above $73 hit the previous day. US Light crude oil futures for January delivery fell 25 cents to $72.41 a barrel by 0630 GMT, after hitting a high of $73.13 a barrel earlier, while in London Brent crude oil was at $74.16.

“Inventory was the single issue that was dragging down the market — there’s no question about it,” said Tony Nunan, risk manager with Tokyo-based Mitsubishi Corp. “The economy may not be falling any more, but we’re not out of the woods yet — we still have a lot of inventory and fuel demand remains anaemic. We’re going to see this pattern of volatility in prices, with swings determined by inventory levels.”

Tags:  dollar index, oil prices, trading, US