Tuesday, June 30, 2009

>Crude falls in Asia; rally may be over

Singapore - Crude prices slipped in Asia Monday, weighed on by lower Asian equity markets, as speculators began losing interest in supporting oil due to a lack of clear fundamentals.

"Given crude oil's parabolic rise from mid-April through mid-June, we think it quite telling that the rash of recent headlines has yet to spur the market toward the magical USD75 level that all of those Wall Street types like to tout," said analysts at the Schork Report in a note to subscribers.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in August changed hands at USD68.81 a barrel at 0654 GMT, 35 cents lower in the Globex electronic session.

August Brent crude on London's ICE Futures exchange was down 32 cents at USD68.60 a barrel.

Rising crude prices recently have been correlated with higher equity markets and a weaker U.S. dollar, which makes commodities such as oil more attractive to investors. But crude fell in Asian trading hours even though the dollar was broadly lower against its major counterparts.

"The demand side is what's concerning investors," said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. "It looks like crude has come a little bit ahead of itself."

Investors typically invest in commodities such as oil as a hedge against inflation, which has provided support to oil prices, he said, adding that the lack of a strong mention of inflation from the U.S. Federal Open Market Committee last week may have tempered those concerns.

Protests in Iran, supply disruptions in Nigeria and a weaker dollar "haven't even mustered a yawn from the bulls," Schork Report analysts said. "Markets that fail to endure upon receipt of news that would reasonably be expected to sustain that trend are often a sign, a good sign, that that trend has run its course."

Meanwhile, Moltke-Leth said he expects oil to trade between $60 and $70 a barrel for most of the year.

"OPEC seems pretty prepared to protect this level," he said. "It's not unthinkable that we'll see supply cuts from OPEC if crude should slip below $60," he added.

Nymex reformulated gasoline blendstock for August, the more actively traded contract, fell 69 points to 186.50 cents a gallon, while the more actively traded August heating oil contract was at 176.99 cents, 111 points lower.

ICE gasoil for July changed hands at $555.25 a metric ton, down $2.25 from Friday's settlement.