Nymex Crude Extends Losses On Stronger Dollar

HOUSTON, March 20, 2008 (Dow Jones Newswires)

Crude oil futures are trading lower Thursday, as the strengthening dollar prompted investors to extend the previous day's commodities selloff.

Light, sweet crude for May delivery traded $3.24 lower, or 3.2%, at $99.30 a barrel on the New York Mercantile Exchange. The May contract is trading for the first time as the front month. Brent crude on the ICE futures exchange traded $2.44 lower at $98.30 a barrel.

April crude settled $4.94 lower on Wednesday, in the contract's final day of trading. The May contract also declined $5.96, or 5.5%. The dollar firmed overnight against the euro, supported by speculators exiting from commodities positions, and the strengthening U.S. currency in turn only convinced more investors to get out of oil.

Futures are receiving little support from supply and demand fundamentals, either. U.S. equities dropped Wednesday, as strong earnings from several large brokerages failed to erase concerns about the financial sector raised by the buyout of Bear Stearns Cos. (BSC) earlier in the week. The Department of Energy also released data Wednesday showing a small build in oil inventories, which on the Gulf Coast have reached a five-month high.

The "combination of weak market fundamentals and likely negative economic news flow will likely heighten the risk of speculative sell-offs," wrote analysts with Goldman Sachs.

The question facing traders is how much lower crude has to go, especially since past dips were instantly erased by bargain hunters jumping into the market, said Michael Zorn, president of Skokie Energy, a Princeton, N.J.-based brokerage.

"Right now the first order of business for the market is seeking a level of support, I don't know if it's here," he said. "We haven't been down here for a while."

Jim Ritterbusch, president of a trading advisory firm, sees support at $98.50 a barrel - but he cautioned that price movements will become increasingly unpredictable if the rally is truly fizzling.

"The market has moved into a new phase in which volatility will be the order of the day with daily price swings of $3-$4 ... becoming increasingly common," he wrote.

Front-month April reformulated gasoline blendstock, or RBOB, recently traded down 3.58 cents, or 1.4%, at $2.5245 a gallon. April heating oil traded 6.27 cents, or 2.1%, lower at $2.9540 a gallon.

HOUSTON, March 20, 2008 (Dow Jones Newswires)