Oil prices slide as dollar strengthens

4th May 2010, Comments 0 comments

World oil prices shed more than a dollar on Tuesday as many traders took their cue from a stronger US currency and falling stock markets amid stubborn jitters about Greece.

Brent North Sea crude for June delivery fell 1.23 dollars to 87.71 dollars a barrel in midday London trade.

New York's main contract, light sweet crude for June, dropped 1.18 dollars to 85.01 dollars.

Oil in New York fell "below the 86-dollar mark on the back of a firmer US dollar and weaker equity markets", said Commerzbank analyst Carsten Fritsch.

The euro slumped to 1.3088 dollars on Tuesday -- hitting the lowest level for one year -- as dealers failed to cheer a multi-billion-euro bailout of crisis-hit Greece.

The stronger US unit hurts dollar-priced crude oil, which becomes more expensive for buyers using weaker currencies.

Over the weekend, eurozone finance chiefs approved an unprecedented 110-billion-euro (145-billion-dollar) package of loans for Greece, struggling to shake off a crippling debt and deficit burden.

And stubborn concerns remain about high levels of debt in eurozone nations Ireland, Italy, Spain and Portugal.

"Although the unprecedented 110 billion euro rescue plan for Greece looked very positive at first sight, there is unrest on the streets, and the market reacted rather cautiously," said Tamas Varga, analyst at PVM oil brokers.

"The market is clearly still worried about when the next euro skeleton is going to fall out of the cupboard."

Traders also kept a close eye on the enormous oil slick in the Gulf of Mexico.

Winds pushed the oil slick towards fragile wetlands on the United States coast on Tuesday, as efforts intensified to bottle up a ruptured oil well causing the growing environmental disaster.

"The oil slick is attracting more and more attention because now it is very likely that the slick will somehow block the Houston shipping channel, which could potentially affect imports to the US," said Clarence Chu, a trader with Hudson Capital Energy.

Beleaguered energy giant BP said it had prepared the first of three giant domes to collect oil gushing into the Gulf of Mexico and channel it into a waiting tanker.

But a political tempest spread across the US, with California Governor Arnold Schwarzenegger backing away from a contentious proposal to drill for oil off the state's southern coast.

At least 210,000 gallons of crude a day has been streaming from a well below the Deepwater Horizon rig that sank on April 22, two days after a massive explosion that killed 11 workers.

A slick now covering the size of a small country has already touched Louisiana and is moving along the coast.

Later Tuesday, traders will digest a barrage of key data that will give a reading on the health of the US economy.

"It is quite a busy day ... with investors' focus switching to the US factory orders, pending home sales and durable goods data for March that could provide further signs of the US economic conditions and could affect the direction of the dollar," said Sucden analyst Myrto Sokou.


© 2010 AFP

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