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Oil steady above $123 as dollar rise trims gains

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Reuters: Oil steady above $123 as dollar rise trims gains

Thu May 8, 2008 1:05am EDT

By James Topham

 

TOKYO (Reuters) – Oil futures were steady over $123 a barrel on Thursday, pulling back from a record high as the dollar’s rise to a two-month high against the euro offset news of falling U.S. diesel stockpiles.

U.S. crude for June CLc1 was up 2 cents at $123.55 a barrel by 0228 GMT, off the record of $123.93 hit earlier. London Brent crude LCOc1 was up 5 cents at $122.37 a barrel.

Data on Wednesday from the U.S. Energy Information Administration showed a decline last week in distillate inventories — which include diesel and heating oil — that brought stockpiles in the world’s biggest energy consumer nearly 13 percent below a year ago. [EIA/S]

Tight power supplies in China, South Africa, Chile, Argentina and parts of the Middle East have set off a worldwide boom in demand for diesel for use in electric generators, adding to robust demand for use in Europe’s passenger vehicle fleet. [nN25293667]

But the impact of the decline was tempered by larger-than-expected increases in stocks of both crude oil and gasoline.

“What we are seeing today is a market correction, as the market feels that the price hit earlier was too high for only a fall in distillate inventories,” said Tatsuo Kageyama, an analyst at Kanetsu Asset Management.

Weighing on oil, the euro fell to a two-month low against the dollar on Thursday, as a sharp drop in euro zone retail sales raised worries about downside risks to the region’s economy. [USD/]

The dollar slipped to a record low against the euro last month, boosting dollar-denominated commodity prices, but has since recovered by more than 4 percent against the single currency.

Traders will be looking at the release later on Thursday of U.S. government data for initial jobless benefit claims (1230 GMT) and wholesale inventories (1400 GMT) for an indication of how the economy is performing. ECONUS

Exxon Mobil (XOM.N: QuoteProfileResearch) was reported lifting a force majeure on its crude oil exports from Nigeria on Wednesday, ending one of the factors that had helped lift oil above $120 a barrel. [nL07852948]

(Reporting by James Topham; Editing by Michael Urquhart)

 

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