Crude Oil Falls Below $33 a Barrel on Dollar, Contract Expiry

asr: oil price drivers as of today: 1)storage shortage 2) strong dollar 3) easing geo-political

Jan. 20 (Bloomberg) -- Crude oil fell below $33 a barrel in New York as the strengthening dollar reduced the appeal of commodity investments at a time when demand is declining and stockpiles are rising.

At Cushing, Oklahoma, where the benchmark for New York futures is stored, inventories have climbed to 33 million barrels, the highest since records started four years ago. The February contract will cease trading today, so traders have to sell futures or accept the barrels at a time of falling demand.

“Traders are rolling over to the next month to avoid delivery and the dollar is rallying,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “All this against a background of falling demand and easing geopolitical tensions.”

Crude oil for February delivery fell to $32.70, down 10.4 percent from last week’s close and the lowest since Dec. 19, on the New York Mercantile Exchange today. The contract traded at $33.37 a barrel at 10:45 a.m. London time.

Floor trading was closed for the Martin Luther King Jr. holiday yesterday. Trades then will be booked today for settlement. The more-actively traded March contract was at $39.59, down 7 percent.

The U.S. dollar climbed as high as $1.2921 against the euro, the strongest since Dec. 10, and traded for $1.2977 as of 10:25 a.m. London time. Gains in the U.S. currency diminish the appeal of dollar-priced commodities used to hedge against inflation.

‘Weak Sentiment’

“We’re seeing the dollar stronger again and weak demand(Oil) is still dominating,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “As long as the market ignores the supply side, we’ll have weak sentiment.”

The U.K. government said yesterday it will spend an extra 100 billion pounds ($142 billion) to support the nation’s banks, a second lifeline in three months. The need for the latest package spurred concern that global financial crisis is worsening.

“For the next six months we’ll see awful economic data coming out, banks possibly having to be nationalized and excess inventories in the U.S.,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “There is really nothing that can pull this market higher.”

Brent crude oil for March settlement fell as much as $1.54, 3.5 percent, to $42.96 a barrel on London’s ICE Futures Europe exchange. It traded for $43.60 at 10:50 a.m. London time.

Russia Dispute

Russia and Ukraine signed 10-year natural-gas contracts, ending a dispute that’s squeezed supplies to the European Union for almost two weeks. Shipments resumed today.

Rising U.S. stockpiles and forecasts from the International Energy Agency and OPEC on declining world demand contributed to an 11 percent decline in Nymex crude last week. Prices are down 20 percent this year, after tumbling 54 percent in 2008.

Crude-oil inventories at Cushing, Oklahoma, where West Texas Intermediate traded on the Nymex is stored, climbed 2.5 percent to 33 million barrels last week, the Energy Department said this week. It was the highest since at least April 2004, when the department began keeping records for the location.