Despite losing ground during an earlier match with a stronger dollar and negative economic news on the domestic front, oil maintained its balance above $72 on the New York Mercantile Exchange Thursday, standing tall in a current $65-$75 trading range.
After paring some of its losses today, the price of light, sweet crude oil for January delivery ultimately held its ground at $72.65 a barrel, nearly unchanged from yesterday's positive settlement but down by a mere $0.01.
This week, oil prices overcame a nine-day losing streak as the market's supply-side was buoyed by a better-than-anticipated drop in crude and distillate stocks reported yesterday. Although the news added some bullish momentum back into energy prices, the news did not signal an uptick in demand.
Upbeat Fed Adds Weight to Dollar, Pressures Oil
Lifted by positive sentiments echoed by the Federal Reserve, the greenback firmed against the euro today, which sent crude prices to the downside during earlier trading.
Furthermore, worse-than-expected jobless claims in the U.S. put a damper on Wall Street, which in turn put additional pressure on oil prices as investors chose to seek safe-haven in a strengthening dollar rather than bet on risky commodities.
"Initially, oil sold off as the dollar got stronger," said Phil Flynn, vice president in charge of research for PFG Best in Chicago, "and I think the reason the dollar got stronger was two-fold."
"I think some investors looked at yesterday's fed meeting and looked at the slight nuances and statements, and as small as they were, I think it was generally taken by the market as positive, and that we are getting closer to seeing a raise in the interest rates."
With the possibility of higher interest rates and a healing economy, the dollar will continue to firm, Flynn noted, which may cause oil prices to test in the $60 range in the near term.
"There's also still some lingering concern about some of those credit crises that have popped up in places such as Greece and Dubai, which also fuels concern going into a holiday week/weekend," the analyst explained. "So I think you saw a little bit of a risk-aversion trade today as people bought the dollar and got out of some of these other markets."
Natural Gas Burns Bright as Winter Chills
On the upside of energy commodities, natural gas spot prices at the Henry Hub gained close to 31 cents today, inching closer to a new $6-threshold at $5.768 per thousand cubic feet. Natural gas futures have seen a boost due to the onset of colder weather conditions ushering the nation into the official heating season.
Also helping to spur trading for the energy commodity, the U.S. Energy Information Administration noted today in its weekly storage report that the level of working gas in underground storage fell by 207 billion cubic feet (Bcf) to 3,566 Bcf during the week to Dec. 11 -- a substantial withdrawal from a bearish supply overhang that pressured prices below $5 at the start of the month.
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