Monday, April 25, 2011

Crude Oil Falls From 31-Month High as U.S. Equities Drop, Dollar Rebounds

By Margot Habiby

Crude oil fell from the highest price in 31 months in New York as U.S. equities declined and the dollar erased intraday losses against other major currencies.

Oil and the Standard & Poor’s 500 Index dropped for the first time in a week as Kimberly-Clark Corp. (KMB) cut its profit forecast and shares of commodity producers decreased. Crude failed to maintain gains after touching $113.48 a barrel earlier today, the highest price since Sept. 22, 2008.

“We’re reacting to the S&P 500 and the U.S. dollar,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We have people adjusting their risk positions continually” as prices touched technical levels.

Oil for June delivery tumbled 35 cents, or 0.3 percent, to $111.94 a barrel at 12:35 p.m. on the New York Mercantile Exchange. Futures have risen 32 percent in the past year.

The S&P 500 slipped 0.2 percent to 1,334.68, and the Dow Jones Industrial Average fell 33.83 points, or 0.3 percent, to 12,472.16.

Crude’s intraday high breached one set April 11 at $113.46.

“We hit that high, and people said that’s as high as we’re going to go today, so I’m going to take my profits,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.

The Dollar Index, a gauge of the U.S. currency against six counterparts such as the euro and the yen, rose as much as 0.2 percent to 74.268. The index has fallen 6.4 percent this year.

Commodities Slip

“The weak dollar is really continuing to be the primary driver,” said Kyle Cooper, director of research for IAF Advisors in Houston. “You’re seeing a run into gold and silver as a hedge against all the major currencies, and into oil, as well, and all the other commodities.”

Earlier, oil jumped as gold and silver climbed to records and other commodities advanced as alternative investments to a weakening U.S. dollar. Precious metals also surged on speculation that China will increase purchases to diversify its foreign-exchange reserves.

The S&P GSCI Total Return Index of 24 commodities slipped to 751.62 from 752.06 on April 21, data compiled by Bloomberg show. It has risen 2.4 percent in the past week.

Futures also advanced after Syrian security forces stormed the city of Daraa, killing at least five people, while unrest in Yemen showed no sign of ending. U.S. Senator John McCain said rebels in Libya need more assistance in the fight against Muammar Qaddafi’s forces.

Oil has advanced 22 percent this year, stoked by turmoil in the Middle East and North Africa that has toppled leaders in Egypt and Tunisia and spread to Libya, Algeria, Bahrain, Iran, Oman, Syria and Yemen. Libyan crude output, which averaged 1.6 million barrels a day last year, fell to 390,000 barrels a day in March, according to a Bloomberg News survey.

Brent Falls

Brent crude oil for June settlement fell 45 cents, or 0.4 percent, to $123.54 a barrel on the London-based ICE Futures Europe exchange. Most European countries have a public holiday today for Easter Monday.

Brent crude for June was at a premium of $11.60 a barrel to New York futures settling in the same month. The premium has shrunk $2.32 from a week earlier as supplies fell at Cushing, Oklahoma, the delivery point for West Texas Intermediate grade. Inventories dropped 770,000 barrels to 41.1 million in the week ended April 15, the Energy Department said on April 21.

Chinese Growth

Oil also fell as China’s banking regulator set capital targets for the nation’s five biggest lenders above the minimum 11.5 percent ratio amid concern that credit risks may rise, three people with knowledge of the matter said.

The move by China, the world’s fastest-growing oil consumer and the second-largest after the U.S., may help policy makers curb loan growth after inflation accelerated and real estate prices rose following a $2.7 trillion two-year credit boom.

The central bank this month raised the amount of deposits lenders must set aside to the highest in at least two decades, while the banking regulator ordered a new round of stress tests on property loans.

Bullish bets on crude climbed in the past week, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. Net-long positions in oil increased 8,337 futures and options combined, or 3 percent, to 289,916, according to the CFTC report.

U.S. crude inventories fell 2.32 million barrels to 357 million, the first drop since February, the Energy Department said.

Oil volume in electronic trading on the Nymex was 211,975 contracts as of 12:28 p.m. in New York. Volume totaled 420,991 contracts April 21, 46 percent below the average of the past three months. Open interest was 1.55 million contracts. U.S. financial markets were closed April 22 for Good Friday.

To contact the reporter on this story: Margot Habiby in Dallas at

To contact the editor responsible for this story: Bill Banker at

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