Oil prices slide as dollar rallies, reversing early gains

Oil prices slid yesterday, reversing early gains as a rebounding dollar weighed on commodities denominated in the US currency.

Prices were already lower when market intelligence firm Genscape reported a build of more than 840,000 barrels in US crude in the four days to April 19th at the Cushing, Oklahoma delivery point, traders who saw the data said.

The Genscape data further weighed on sentiment. Market players already were concerned that this month’s 14 per cent rally could coax US shale crude producers to raise output.

Brent crude futures’ front-month contract was down 55 cents, or 1.2 per cent, at $45.25 a barrel in afternoon trading, well off its session high of $46.18. Brent had gained 7 per cent in two previous sessions.

The front-month in US crude’s West Texas Intermediate (WTI) slid 48 cents to $43.70 a barrel, off its session high of $44.49.

Expensive

Prices rose early, then retreated after the dollar index rebounded, making crude and other commodities denominated in the US currency more expensive to holders of currencies like the euro.

Despite yesterday’s slide, Brent and WTI are up about 70 per cent from multi-year lows hit between January and February. The rally came despite builds in US crude inventory and failure by major oil producing countries to agree to an output freeze to fight the global supply glut.

“If you were to take the fundamental pieces of the puzzle, they really don’t compare with the latest two days of pickup in prices,” said Harry Tchilinguirian, global head of commodity strategy at BNP Paribas.

“Should we really be at $43 on a WTI basis because the closer we get to $45 mark with a curve that is in contango in the case of WTI, the more you’re going to throw a lifeline to US shale producers.” – (Reuters)