Crude futures fall below $62/barrel as US dollar strengthens

London (Platts)--11Dec2006

Global crude futures fell Monday, continuing a sharp sell-off late Friday
triggered by a stronger US dollar and a weakening across many commodities.
At 1205 GMT, January ICE Brent futures changed hands at $62.01/barrel,
down 19 cents from Friday. WTI futures on both NYMEX and ICE weakened by 42
cents to $61.60/barrel.
"There is generally a bearish feel. The settlement on Friday,
technically, was very bearish as a stronger US dollar pushed prices down
across most commodities, including gold, and crude seemed to be the last one
to react," a London-based broker said.
Market players also noted that once the front-month crude futures on ICE
and NYMEX tested two-month highs early last week and failed to break through
that level, prices then began to recede.
On Friday, late in the trading day, front-month January ICE Brent futures
lost over $1.50/barrel in value as the dollar rallied late in the session. On
Monday morning the euro dipped to $1.3146 from $1.3371 a week ago.
Crude traders said the bearish settlement on Friday meant there may be
more action to the downside.
"I think prices could fall another $1-1.50 to near $60. The support at
$60/barrel is strong so I would be surprised to see us fall through it," a
trader said.
Inter-month spreads have strengthened recently ahead of the front-month
ICE Brent expiry on December 14. Market players expect January Brent to expire
above February due to a 41% cut in the Brent loading program, reported on
Friday.
Non-commercials, which are primarily comprised of hedge funds, added to
their long position in crude futures and options on the New York Mercantile
Exchange as of the reporting week ending December 5, according to data
released Friday by the Commodity Futures Trading Commission.
Non-commercials were long 51,235 contracts of crude futures and options
with 37% of the position being held on the futures market.
Commercials, which are comprised of oil companies, refiners and banks
also were buyers of crude futures, causing them to switch to a long position
from a short. However, commercials were short 30,679 lots of crude futures and
options while banks were short 99,309 lots, suggesting oil companies and
refiners were actually long the market.
Product prices were also weaker. December ICE gasoil futures fell
$17.00/mt to $539.00/mt, catching up with the fall in crude prices late on
Friday. On NYMEX, January heating oil futures weakened by 1.29 cents to
$1.7444/gallon whilst the RBOB contract fell 0.51 cents to $1.6120/gallon.
--Jean-Luc Amos, jean-luc_amos@platts.com

For more news, request a free trial to Platts Futures & Derivatives Review at
http://www.platts.com/Request%20More%20Information/index.xml?story