So what’s going on in the global oil market?
For two weeks or more now oil prices have eased, but the resurgence in the US dollar can’t be solely blamed.
In fact oil prices were weak to unsteady while the US dollar was being sold off, and gold absorbed all the attention with its record breaking run, which has now come to an end.
On Friday Chinese and US economic data looked solid, the IEA upped its 2010 oil consumption estimate and that would normally be bull points for oil, as it would raise expectations of rising demand next year and prices would rise (and the US dollar fall).
The IEA revised up by 130,000 barrels a day its forecast for 2010 global oil demand, which is now expected to average 86.3 million barrels a day.
That’s an increase of 1.7%, or 1.5 million barrels a day, compared to 2009.
“Growth continues to be driven by non-OECD countries, notably in Asia and the Middle East,” the IEA said in its monthly oil report released Friday.
“Nonetheless, OECD prospects have improved to some extent, particularly in the Pacific.”
But the greenback is now reacting to positive news because traders see the data as bringing closer the day when US interest rates are raised by the Fed.
The Fed’s last meeting for the year (and the decade) this week will be the major driver, especially if the post-meeting statement changes any of its previous wording relating to interest rates.
So oil prices completed their longest losing streak in six years to end at a two month low.
Rather than focus on the solid news from China and the good retail sales figures, traders focused on reports that the US fuel had ample supplies of oil and oil-based products.
And there was the impact of the US dollar which had a second very strong Friday’s trading in a row.
As a result, crude-oil futures fell for the eighth straight session the longest downer in more than six years, after better-than-expected retail sales and consumer sentiment boosted the dollar and sent commodities lower.
Crude ended the week down 7.4%, the biggest weekly loss in 11 weeks.
Crude oil for January delivery ended down 67 cents, or 0.9%, at $US69.87 a barrel on the New York Mercantile Exchange.
The losing streak is the longest since October 2003.
Oil is 10% down over the past seven trading days and 16% or more since its recent peak of more than $US83 a barrel six weeks or so ago.
Some traders reckon speculators are trimming their positions ahead of the end of the year, but what is spooking many are the large stocks of oil and products, especially petrol, diesel and heating oil stored on tankers in Asia, Europe and in the Americas.
Investors have bought this product forward in the expectations that they will deliver it as demand rises (or rather sell into a stronger market next year), but prices have traded sideways and now weakened as demand from industry and mining has remained weak.
The International Energy Agency raised its forecast for next year’s global oil demand and China said on Friday its industrial production accelerated in November to the fastest rate this year, with oil consumption rising strongly.
But Chinese production and imports were weaker than expected, leading analysts to say that the country is using stockpiled oil and product, rather than buying heavily on world markets.
US petrol supplies have hit their highest level since April.
The US government said stocks of petrol hit their highest level since April 17, while stocks of distillates, such as heating oil and diesel, also rose again.
While stocks of crude oil fell last week, the Energy Department said they were still 7.2% higher than the five-year average for the period.
Total US daily fuel demand averaged 18.5 million barrels in the four weeks ended December 4, down 3% from a year earlier and consumption of distillate fuel averaged 3.5 million barrels a day over the period, down 8.3% from the same week in 2008.
Comex gold for February delivery fell $US6.30 to settle at $US1,119.90 an ounce, more than $US100 dollars an ounce under the all time high of $US1,227.50 an ounce set 10 days ago.
Gold futures were up more than $US10 earlier in early trading, but shed ground as the dollar turned sharply higher after US retail sales and consumer-sentiment data suggested a stronger economy.
(Logically those figures could also suggest a rise in inflationary pressures, making gold more attractive. But it seems it’s not a hedge against inflation at the moment, more a rival currency to greenback).
Gold futures have climbed by around 27% so far this year, down from more than 34% a week or so ago.
In fact gold prices have lost around 8% from December 3 as the US dollar has turned higher.
New York silver futures for March delivery were little changed at $US17.188 an ounce, up by just over 50% this year.
Copper prices rose Friday after six days of losses as China’s industrial output increased more than forecast in November and the country’s imports of the metal rose from the surprising nine month low hit in October.
The 19% rise in industrial production was above forecast while imports of copper and products made from the metal rose 10% in November.
Comex copper for March delivery rose 3 cents, or 1%, to $US3.133 a pound on Friday.
The metal had shed 4.8% in value over the previous six days.
Friday’s rise in the US dollar in late trading did limit further gains.
Three month LME copper rose 0.4% to $US6, 835 a metric tonn
