Oil Skids toward $81 as Dollar Strengthens
Accelerated by Friday's fraud charges brought against Wall Street's most profitable bank, NYMEX crude futures extended losses, skidding toward $81 a barrel Monday as oil traders cashed in risky commodities for the dollar's safe haven.
Ahead of tomorrow's expiration for the front-month May contract, the price of light, sweet crude oil traded down to $81.45 a barrel after rallying earlier this month toward a new resistance area near $90.
Also closing on the downside today, NYMEX gasoline futures and natural gas spot prices at the Henry Hub settled below recent thresholds to $2.25 a gallon and $3.94 Mcf, respectively.
Rising supplies, a stronger dollar and pre-expiry trading have all weighed on oil prices in the last few sessions; however, the energy commodity's price is likely to remain in the 80-dollar range, according to Bill O'Grady.
The chief markets strategist at St. Louis-based Confluence Investment Management, O'Grady also pointed to concerns over attempts to cool off property markets in China through fiscal tightening to restrict growth as a factor in crude's sell off.
"The oil market had been shrugging off strength in the dollar, and now that has reversed itself somewhat," O'Grady noted.
"Oil's market fundamentals, such as gasoline demand, are still not great, but they are better than they were six months ago due to seasonal strength," the analyst added.
Today, the U.S. currency strengthened against a basket of currencies, driving investors away from dollar-denominated commodities as a result.
Additionally, Iceland's volcanic eruption ignited oil demand concerns in Europe, which also pressured crude prices during today's session. The volcanic ash cloud hanging over the euro zone has led to the suspension of UK offshore helicopter flights, and has grounded most of Europe's commercial airlines.