Nymex Crude is down $0.98 to $72.95 and Brent Crude is down $1.09 to $76.43, as a bolstered dollar drives investors (who have been using oil as a hedge against inflation) out of oil, marking a two-month low for oil prices and the fourth straight day of sell-offs.
This morning, the DJIA opened markedly lower, with some heavy hitters like McDonalds and 3M offering poor profitability data points, and concerns over Dubai World sparked by downgrades from Moody’s impacting the exposed Euro.
Fed suggestions of continued low interest rates mean that the extended carry trade potential for the dollar (USD) may have its limits, due to U.S. data like the jobs report of last week and market forces driving people into the USD.
Victor Shum of the Singapore consultancy Purvin & Gertz commented on the role of the dollar as a “leading driver of oil pricing”, and said that “when the price falls to the mid-$70s, many market participants see that as a buying opportunity”.
Stephen Schork, editor of The Schork Report, cautioned investors regarding promising signs in the U.S. labor market, saying that demand may not follow suit and that the “residue of this recession will linger in the psyche of the American consumer”, whose spending drives two-thirds of the economy.
The USD rose to $1.4776 against the Euro and to $1.6292 against the pound, but slid to 88.52 against the yen.
Elsewhere in energy, Nymex heating oil was up 0.03 cents, gasoline was up 0.29 cents, and natural gas was up 1.3 cents. Natural gas should see continued demand due to forecasting of low temperatures this winter on the east coast, but analysts suggest profitability would be limited due to high inventories.