Oil prices drop as dollar strengthens

13th May 2010, Comments 0 comments

Oil prices fell on Thursday, under pressure from a strengthening dollar that makes dollar-priced crude more expensive for buyers using weaker currencies.

New York's main contract, light sweet crude for June delivery, dropped one dollar to 74.65 dollars a barrel.

Brent North Sea crude for June shed 68 cents to 80.52 dollars.

The European single currency fell hard against the dollar on Thursday as traders sought the safe-haven US currency in the face of mounting eurozone debt and deficit concerns.

The shared eurozone unit sank as low as 1.2540 dollars -- not far from the 14-month low of 1.2529 dollars struck one week ago.

"A weaker euro still weighs on prices," said VTB Capital analyst Andrey Kryuchenkov.

Prices rose in Asian trade earlier Thursday, buoyed by positive economic data from Europe and the United States, analysts said.

"Oil is trying to look for a place where it belongs," said Victor Shum, a Singapore-based analyst with global energy consultancy Purvin and Gertz.

Prices were "recalibrating to the current environment" where global markets are pondering whether the eurozone bailout plan is enough to stave off financial contagion arising from Greece's debt problems.

"If the European debt crisis stabilises and subsides as a result of this bailout package that was announced at the beginning of the week, oil pricing is likely to rebound," said Shum.

The European Union and the International Monetary Fund agreed over the weekend on a 750-billion euro (one trillion dollar) rescue package for Greece and other troubled eurozone members.

Concerns about how the rescue package will be carried out, however, cut short initial euphoria over the deal.

Oil traded mixed on Wednesday as investors remained sceptical about the bailout plan and US crude stockpiles rose more than expected.

Rising US energy stockpiles, which indicates weaker demand, could limit any upside for oil prices, according to analysts.

The US Department of Energy said Wednesday that crude stockpiles rose 1.9 million barrels last week -- more than double analysts' forecasts.

Stockpiles at the key Cushing, Oklahoma, terminal rose to a record 37 million barrels from 36.2 million the week before.

Demand in the United States is closely watched by the market because it is the world's biggest energy consuming nation.

© 2010 AFP

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