Light oil prices trading under $70, eyes on US dollar

Light oil prices headed lower for a ninth straight session in trading on Monday, but pared losses after news of a Dubai bailout, which boosted the euro against the US dollar as risk appetite improved. A weak US dollar makes dollar denominated commodities like crude oil less expensive for holders of other currencies and tends to support prices.

US Light crude oil futures for January delivery fell 22 cents to $69.65 a barrel by 2:14 p.m. EST, after falling as low as $68.59 earlier, the lowest since October 5. If the contract settles down on Monday, that would match a nine day losing streak in July 2001.

Crude oil prices, up some 56 percent so far this year, but still less than half its July 2008 peak of more than $147 a barrel, has fallen some 11 percent in the past nine sessions.

“Recently forex rates have had a large impact on the market,” said Tomokazu Amano, an analyst at Mitsubishi Corp Futures & Securities in Tokyo. “As the Christmas and year-end seasons approach, position adjustments to cut long positions are also increasingly being seen.”

Traders said one item to watch this week is the US Federal Reserve’s monetary policy decision, to be announced on Wednesday. The Federal Open Market Committee will likely try to find a way to capture a somewhat brighter economic outlook in its policy announcement, while maintaining its pledge to keep borrowing costs at near record lows for an “extended period.”

But concerns about a sluggish recovery in global fuel demand, along with high fuel stockpiles in the United States, have been pressuring crude prices.

In particular, stocks at Cushing, the delivery point for NYMEX WTI crude futures, have swelled by 7.8 million barrels in the last six weeks to 33.4 million barrels, putting pressure on the front month and widening its discount to the second month to over $2, from around 40 cents in October and 60 cents in November.

However, oil storage capacity at Cushing has expanded by 5.2 million barrels this year, a Reuters survey shows, cutting the risk that a shortage of tanks could cause oil prices to plunge.

Tags:  Dubai, light oil prices, US dollar