Oil May Fall on Demand, Strong Dollar, Survey Shows

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31 Aug 2009

Crude oil futures may fall on speculation that demand will be slow to rebound and the dollar will strengthen, a survey of analysts showed. Twenty-three of 39 analysts surveyed by Bloomberg News, or 59 percent, said futures will decline through Sept. 4. Six respondents, or 15 percent, forecast that the market will rise, and 10 said prices will be little changed. Last week, 55 percent of analysts said oil would drop.
“We look for oil prices to be on the defensive,” said Mike Armbruster, co-founder of Altavest Worldwide Trading in Laguna Hills, California. “Bearish factors include the high likelihood that the stock market will have a substantial pullback in the coming weeks, the risk of a rising dollar, oil’s failure at $75 and this week’s inventory build.”
Oil prices dropped below $70 a barrel in intraday trading yesterday to their lowest level in more than a week, after the Energy Department reported Aug. 26 that crude oil stockpiles rose 128,000 barrels last week, compared with forecasts for a 1.15 million-barrel reduction.
A stronger dollar reduces the appeal of commodities as an alternative investment. The Dollar Index, which gauges the currency’s performance against the euro and five other monies, has gained 1 percent since reaching its 2009 low on Aug. 5.
Crude oil for October delivery fell $1.15, or 1.6 percent, to $72.74 a barrel this week on the New York Mercantile Exchange. Oil reached a record $147.27 on July 11, 2008. Futures have advanced 63 percent this year.
The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.

Source: Bloomberg