Sunday, April 5, 2009

>Crude down on dollar bounce; econ unease lingers

Singapore - Crude oil futures fell Friday in Asia as a rebound in the dollar encouraged traders to take profit.

While regional share markets remained on track for a solid finish this week, traders noted a lingering sense of unease over the outlook for the global economy.

"We believe that oil prices are likely to slip back into the USD40's a barrel over the next couple of months, but may still head higher in the latter part of the year," said David Moore, commodity strategist at Commonwealth Bank of Australia. "Oil consumption remains weak."

On the New York Mercantile Exchange, light, sweet crude for delivery in May traded at $52.09 a barrel at 0630 GMT, down 55 cents, or 1%, in the Globex electronic session.

May Brent crude on London's ICE Futures exchange lost 46 cents to USD52.29 a barrel.

The dollar held steady against the euro but traded firmer versus the yen, briefly topping Y100, a five-month high.

Market participants still "want to see if the rally is real. The U.S. economy doesn't seem to have hit its bottom and crude demand is not strong at all," said Koichi Murakami, a broker at Daiichi Shohin.

Oil prices on both sides of the Atlantic surged about 8.8% Thursday as a decline in the dollar boosted buying interest among investors, amid renewed optimism over the global economic outlook.

The Dow Jones Industrial Average - for many traders, a barometer of the health of the U.S. economy - spiked above 8,000 points for the first time since February.

This followed a pledge by world leaders from the Group of 20 industrialized nations, who met Thursday in London, to step up efforts to tackle the downturn, including a USD1 trillion commitment to the International Monetary Fund.

Oil's rally showed how a weak dollar and stronger stock markets can fuel speculative fund inflows to commodities, even if fundamentals remained soft - a trend that could persist in the near term.

"Until burdensome domestic supplies of crude and products become too onerous to ignore, we look for the petroleum complex to tag along behind these...large financial swings," Jim Ritterbusch, president at trading advisory firm Ritterbusch and Associates, said in a note to clients.

U.S. non-farm payrolls and unemployment data due at 1230 GMT will guide trading for much of Friday, he added.

Still, other analysts observed that sentiment isn't being driven only by macroeconomic considerations.

Supply-demand factors may be starting to lend support, particularly on the recent aggressive output cutbacks by the Organization of Petroleum Exporting Countries, according to Barclays Capital.

"We see the recent move up in prices as fundamentally justified, as pronounced supply-side (tightness), both in terms of OPEC cuts and involuntary non-OPEC production reductions, have more than offset the steep fall in demand," analysts led by Gayle Berry said in an overnight report.

"As the year progresses, we envisage a further tightening in oil market balances, as the pace of year-on-year demand decline moderates and the full impact of ongoing production declines filter through the system."

At 0630 GMT, oil-product futures were mixed.

Nymex heating oil for May slipped 93 points to 142.98 cents a gallon, while May reformulated gasoline blendstock traded at 145.25 cents, 173 points lower.

ICE gasoil for April changed hands at USD452.25 a metric ton, chalking up USD1.25 from Thursday's settlement.