IPE Brent falls as investors drop long positions on rising dollar

London (Platts)--22May2006

Front-month IPE Brent futures were at a six-week low Monday, as continued
cross-commodity selling by investors on a resurgence in the US dollar, caused
crude futures to fall once again, traders said.
At 0953 GMT, the July IPE Brent futures contract was changing hands at
$67.94/barrel, down 74 cents, a level not seen since April 10.
"The fall this morning is a continuation from Friday and in line with
other commodities. Metals, the FTSE are all falling and crude is going with
them," a London-based broker said.
The recent fall has been due to investors, such as hedge funds,
liquidating heir long positions, market sources said. This is supported by the
latest Commodity Futures Trading Commission report released on Friday.
Non-commercials, which are primarily comprised of hedge funds, liquidated
8,879 contracts of crude futures and options as of May 16, leaving them long
100,483 lots, according to data released by the CFTC.
Non-commercials predominantly liquidated their position in the futures
market and the selling sent prices back below $70/barrel, according to the
Commitments of Traders report.
Earlier Monday, the July IPE Brent contract intra-day low was
$67.63/barrel.
"The major support level was $68/barrel, which has been broken through a
few times today. I think a lot of people have now got stops in at the
$67.40/barrel mark," a trader said.
One of the main reasons for the recent weakening of IPE Brent has been
due to the strengthening of the US dollar. On Monday in early trading, it
extended its recent strengthening, weighing on the prices of
dollar-denominated commodities including oil.
The dollar firmed to Yen 112.05 Monday afternoon in Tokyo, after having
risen to Yen 111.71 late Friday in New York, AFP reported. The dollar was also
stronger against the euro in early Monday trade.
Geopolitical concerns that have affected the market significantly over
the last month or two have been pushed into the background recently. Rhetoric
relating to the standoff between Iran and the West over its pursuit of nuclear
technology was relatively muted over the weekend.
On Sunday, Iran said it would not suspend uranium enrichment activities
despite European Union plans to offer incentives for the Islamic republic to
halt sensitive work.

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