Oil eased towards $125 a barrel yesterday, as a stronger dollar and profit-taking put the brakes on a rally that took it to record peaks last week.
U.S. light crude for June delivery fell 77 cents to $125.19 a barrel by 11:49a.m., off last Friday’s new record high of $126.27 hit on supply concerns and a rush of speculator buying.
London Brent crude fell 77 cents to $124.63.
The stronger dollar could...lead to some profit-taking in energy, said Edward Meir at MF Global, adding that charts showed much of the oil complex to be heavily overbought and prone to a short-term correction.
Crude oil speculators on the New York Mercantile Exchange increased net long positions in crude oil to 63,218 in the week to May 6, up from 53,311 in preceding week, data from the Commodity Futures Trading Commission showed last Friday.
The dollar rose yesterday, closing in on a two-month high against a basket of currencies as a slight rise in risk appetite and growing speculation that cuts to U.S. interest rates may soon end boosted the currency.
Oil has jumped about 13 per cent since slipping to $110.53 a barrel on May 1, as investors seized on supply disruptions in the North Sea and Nigeria, and galloping demand for distillate fuels, notably diesel.
ICE gas oil futures fell more than $8 yesterday on the expiry of the prompt contract, after rising to near last week’s record high of $1,210 a tonne in early trading.
Some analysts have attributed the gains in oil to a wave of fund money pouring into commodities, given the weaknesses in other financial markets.
A recent Sanford C. Bernstein study said that investment flows in the Standard & Poor’s GSCI index and Dow Jones-AIG
Commodity Index had risen to $250 billion so far this year, up from $169 billion at the start of the year.
Oil’s runaway gains prompted talk last week OPEC could consider boosting output before its next scheduled meeting in September should crude oil prices keep rising.
But oil ministers from Ecuador, Qatar, UAE and an Iranian oil official said there were no plans for an early meeting as soaring prices were out of OPEC’s control.
Data released by China on Monday showed that crude oil imports fell 3.9 percent in April from a year earlier, the first decline in 18 months, after refiners slashed purchases from March’s record high and stepped up refined fuel imports.
China, which is likely to overtake Japan as the world’s second-largest crude buyer after the U.S., bought 14.24 million tonnes or 3.47 million barrels per day of crude in April, down from an all-time high of 4.07 million barrel per day in March