Oil ends sharply down on strong dollar, inventories

NEW YORK (BestGrowthStock) – Crude oil fell nearly 5 percent in late trading on Tuesday as rising oil inventories and the stronger dollar pushed oil to its steepest loss in three months.

The dollar’s rise came as investors turned risk averse and sold oil and equities amid concerns that Greece’s debt problems could spread to other euro zone countries. A stronger dollar is usually bearish for oil as it reduces demand for commodities traded in dollars.

“The oil markets were hammered on Tuesday as investors liquidated equities and commodities aggressively,” said Peter Beutel, analyst at Cameron Hanover.

An industry report showing a larger-than-expected jump in inventories sent prices even lower in post-settlement trading.

U.S. crude for June settled at $82.74 a barrel, dropping $3.45, or 4 percent, after hitting an intraday high of $87.15 on Monday, the strongest front-month price since $89.82 traded on October 9, 2008.

In post-settlement trading on Tuesday, U.S. crude ended electronic trading at $82.07, down $4.15 or 4.78 percent, having dropped to $82.05.

Tuesday’s drop was the largest one-day percentage loss since the 4.99 percent slide on February 4, which had also been in concert with a risk aversion tumble in equities, a slump in the euro and a surprise rise in crude inventories.

Brent crude slid $3.27 to settle at $85.67, but held on to its big premium over U.S. West Texas Intermediate crude futures, or also known as WTI.

The industry group American Petroleum Institute’s report late on Tuesday showed crude supplies rose 3 million barrels in the week to April 30, with gasoline and distillate stockpiles also rising more than expected. (API/S: )

Ahead of the weekly oil inventory reports, expectations were that they would show U.S. crude inventories rose 1.1 million barrels as a discount for prompt oil widened the contango structure of the futures curve, a Reuters survey showed. (EIA/S: )

The U.S. Energy Information Administration’s report is set to arrive on Wednesday morning.

The contango, where front-month contracts are weaker than future months, had strengthened on Tuesday to put front-month June crude around $3 less than the July contract.

The back end of the curve also has strengthened, with U.S. futures for five years ahead widening their premium over the front-month to $12.69 from under $5 a month ago.

The euro tumbled to a one-year low beneath $1.30, hit by fear that emergency aid for Greece may not prevent debt crises in other euro zone countries. (USD/: )

U.S. stocks (Read more about the stock market today. ) fell on concerns about Greece’s debt problems and despite data showing new orders received by factories rose unexpectedly and pending home sales rose to a five-month high in March. (.N: )

U.S. gasoline and heating oil futures also fell sharply on Tuesday, with June gasoline futures settling more than 11 cents lower at $2.32 a gallon.

BP (BP.L: ) continued efforts to stop oil gushing into the Gulf of Mexico from a ruptured offshore well, but easing fears of disruptions to the key refining hub on the Gulf Coast weighed on the markets.

“Oil has taken a dive … on the back of downgraded expectations that the Gulf of Mexico oil slick will materially disrupt refining oil production operations in the region,” according to J.P. Morgan’s Lawrence Eagles.

The U.S. Coast Guard said the oil slick had not yet disrupted shipping and operations at the key Louisiana Offshore Oil Port were normal.

Stock Market Money

(Reporting by Robert Gibbons and Gene Ramos in New York, Christopher Johnson in London and Judy Hua in Singapore; Editing by Marguerita Choy)

Oil ends sharply down on strong dollar, inventories