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US Light oil price trading around $78, inventory worries
Published on October 21, 2009 by oilprices · No CommentsUS Light oil price has fallen back toward $78 a barrel in trading on Wednesday, extending the previous session’s decline from a one year peak after a bigger than expected rise in US crude oil inventories.
The American Petroleum Institute said crude stocks rose 3.8 million barrels, more than the forecast. Oil traders will be looking to EIA figures at 10:30 a.m. ET for confirmation.
“The market has eased because of the stockbuild last night in the API stats,” said Christopher Bellew, a broker at Bache Commodities. “Even the technical analysts, who are quite bullish about the market, are cautioning there is room for a correction in the short term.”
US crude oil futures for December fell $1.01 to $78.11 a barrel. On Tuesday, the November US crude contract hit $80.05, a 12-month high for a nearby contract on the NYMEX.
Oil prices gained some support as the US dollar weakened slightly against a basket of currencies. A falling dollar makes oil relatively cheap to holders of other currencies. Technical analysts, who use past price moves to predict future direction, noted oil’s rally has left it looking overbought and, depending on the dollar, the market could fall quite sharply.
“We think the selling may have more room to go, particularly if the dollar strengthens slightly from here,” said Edward Meir, analyst at MF Global. “In fact, we could perhaps sell off to the $75 level, which was trading range resistance that gave way last week.”
The weak dollar and anticipation of future economic recovery have been among the drivers of the oil price rally this year, rather than market fundamentals of supply, demand and inventories.
The International Energy Agency, which represents 28 industrialized countries, has warned that the fast rise in prices could pose a risk to global economic recovery.
But Nigeria’s oil minister, Rilwanu Lukman, said on Wednesday $80 was a fair price for oil and one that should encourage investment in new supplies.
Tags: inventory, light oil price, trading, US