13 May 2013, News Wires – Brent crude oil futures dropped towards $103 a barrel on Monday as the dollar stayed firm, with renewed worries of a slowdown in demand growth from the world’s top oil consumer the US further weighing on sentiment.
The US economy is expected to grow at a slower pace in the second and third quarters of this year, according to the Philadelphia Federal Reserve’s quarterly survey of 42 forecasters, compared with their previous estimates.
Additional pressure for risk assets such as oil came from a broad rally in the dollar following strong data on the US labour market.
Brent crude slipped 77 cents to $103.14 a barrel early on Monday. It settled down 56 cents on Friday and ended the week lower after gains in the previous two.
US oil fell 85 cents to $95.19, sliding the fourth time out of the past five sessions.
Brent is expected to revisit its 10 May low of $101.56, as a downtrend from the 7 May high of $105.94 has not finished, while US oil is expected to retest support at $93.58, according to Reuters technical analyst Wang Tao.
“A strength in the dollar is weighing on commodities across the board,” said Ben Le Brun, analyst at OptionsXpress in Sydney. “For oil, worries of ample supplies is putting pressure. We have unprecedented levels of stockpiles in the United States, with uncertainty surrounding economic growth.”
A firm dollar pressures oil as its strength makes commodities more expensive for holders of other currencies. The dollar rose to a fresh four-and-a -half year peak against the yen on speculation the Federal Reserve could scale back its aggressive monetary stimulus aimed at supporting growth.
Investors are also awaiting data on industrial production from the world’s second-biggest oil consumer China due later in the day. China’s factory output is expected to have grown 9.5% in April from a year ago, recovering slightly from a seven-month low hit in March.
“Oil will definitely take its cue from the China data due later,” Le Brun said. “It will be a crucial piece of data to gauge how the domestic economy is doing.”