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Oil slumps, weighed down by dollar's strength


MARKETWATCH 8:56 AM ET 09/02/14
By Victor Reklaitis, MarketWatch , Eric Yep

NEW YORK (MarketWatch) -- Crude-oil futures lost ground Tuesday, with gains by the U.S. dollar and downbeat Chinese economic data helping to push down prices.

Crude for October delivery (CLV4) fell $1.06, or 1.1%, to $94.90 a barrel, while October Brent crude lost $1.19, or 1.2%, to $101.60 a barrel.

A jump by the dollar was "the biggest thing" weighing on oil, said Darin Newsom, senior analyst at DTN.

"That's pushing commodities lower in general," Newsom told MarketWatch on Tuesday. A stronger dollar tends to weigh on dollar-denominated commodity prices.

U.S. markets are reopening after the Labor Day holiday weekend, and investors are likely to assess recent developments in Ukraine and Libya, and manufacturing and economic data from different countries, traders said.

In Ukraine, the military is moving to adopt a defensive strategy against an incursion by Russian troops, even as U.S. and European officials discuss a fresh round of sanctions against Moscow.

Libya's outgoing cabinet has acknowledged that it has lost control of the capital Tripoli to Islamist-allied militias, risking oil production that averaged around 500,000 barrels a day at the end of August.

Crude prices appear to have stabilized, helped by strong West African crude flows to Asia, but there are significant factors that will prevent a near-term price recovery, Michael Wittner, head of oil research at Societe Generale said in a weekly report.

He said a seasonal drop in global oil refinery operating levels in September and October, rising exports of Libyan crude oil and increasing volumes of crude being placed in storage, will help maintain downward pressure on front-month Brent crude prices.

"In the next couple of months, we see rangebound crude markets, with front-month ICE Brent trading around $102.50 ($ 100-105 range) and Nymex WTI trading around $95 ($92.50-97.50 range)," Wittner said.

Nymex reformulated gasoline blendstock for October (RBV4) -- the benchmark gasoline contract -- fell 4 cents, or 1.4%, to $2.59 a gallon.

-Eric Yep; 415-439-6400; [e-mail]

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