24 December 2014 – Brent futures fell toward $61 per barrel on Wednesday, giving up some of the previous session’s gains, as the US dollar held near its highest level in nearly nine years on strong data.
The dollar index stayed close to its highest since April 2006 after a revised third-quarter US gross domestic product report blew past expectations to register the fastest pace of growth in 11 years.
A strong dollar makes commodities priced in the greenback expensive for holders of other currencies.
Brent for February delivery dropped 28 cents to $61.41 early on Wednesday after settling up $1.58 on Tuesday. US crude fell 29 cents to $56.83 after settling $1.86 higher in the previous session.
“It’s ironic. The US economy is starting to boom and crude oil prices are contracting in the opposite direction,” said Ben Le Brun, market analyst at Sydney’s OptionsXpress.
“Every time oil prices come up for air an Opec member or short sellers manage to push it lower,” he said.
Current oil price levels are shortlived and they would trend higher in 2015 as demand increased and geopolitical factors came into play, Le Brun told Reuters. Oil prices have plunged almost 50% since June.
“The very sharp drop in crude prices that we are currently observing is not sustainable. Over time, the loss in global liquids at Brent prices below $70 a barrel would cause non-Opec growth to grind to a halt while global demand growth would be rejuvenated,” US based Pira Energy said in a research note.
“We believe that industry will finds ways to maintain profitability during the next several years of low prices via cost efficiency steps, productivity improvements and pressure on suppliers for both shale and other high cost supplies,” it said.
Investors were looking ahead to official US oil inventory data to be released by the US Energy Information Administration (EIA) later on Wednesday.
American Petroleum Institute data released Tuesday showed US crude stocks rose by 5.4 million barrels last week.
US commercial crude inventories were forecast to have fallen by 2.3 million barrels in the week ended 19 December according to analysts polled by Reuters.