Oil Drops to One Week Low Below $80 a Barrel as Dollar Gains

Crude oil fell to the lowest level in more than a week as the dollar gained, curbing demand for most commodities as an alternative investment.

Oil decreased as much as 2.3 percent as the dollar index, which tracks the U.S. currency against six others, advanced for the first time in four days and as crude broke through a technical-support level at $80 a barrel.

“There’s some dollar buying, which is putting some pressure on commodities,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. The selling “is more technical than anything else.”

Crude oil for April delivery fell $1.70, or 2.1 percent, to $79.54 a barrel at 11:06 a.m. on the New York Mercantile Exchange. Earlier, it touched $79.40 a barrel, the lowest price since March 2 on an intraday basis. Crude has risen 73 percent in the past year.

The dollar index climbed 0.4 percent to 80.184, its first increase since March 9.

Equities retreated, led by emerging markets, and commodities declined on concern that China and India will seek to restrict economic growth to curb inflation.

“That kind of sets up for a possible topping scenario in crude oil,” said Richard Ilczyszyn, a Chicago-based senior market strategist with Lind-Waldock, a division of MF Global Ltd.

The Standard & Poor’s 500 Index, which rose to a 17-month high on March 11, lost 0.5 percent to 1,144.39 at 11:08 a.m. in New York. The Shanghai Composite Index closed at the lowest level in five weeks.

China Growth

China will account for almost a third of global oil-demand growth this year, the International Energy Agency said last week as it raised its forecast for global oil demand this year by 70,000 barrels a day to 86.6 million. Economies outside the Organization for Economic Cooperation and Development will continue to lead a recovery in energy consumption, it said.

The Organization of Petroleum Exporting Countries will maintain existing production at a meeting this week as it awaits further confirmation of a recovery in demand, according to a Bloomberg News survey of analysts. The group, which pumps 40 percent of the world’s oil, meets for the first time this year on March 17.

Brent crude oil for April settlement dropped $1.81, or 2.3 percent, to $77.65 a barrel on the London-based ICE Futures Europe exchange.


Reporter Margot Habiby can be contacted at mhabiby@bloomberg.net

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