Thursday May 8, 10:04 AM
Oil dips below $123/bbl following yesterday's record high as dollar rebounds
LONDON (Thomson Financial) - Oil dipped to trade just below $123 a barrel on Thursday following yesterday's fresh record high, with a rebound in the U.S. dollar calming bullish sentiment.
Prices surged on Wednesday due to concerns over falling distillate inventories in the United States, continuing the recent run which has seen new all-time highs posted in each of the last three sessions in New York.
While analysts have pointed to long-term fears that rising demand for crude could outstrip supplies to explain crude's most recent rally, as well as short-term concerns over Nigerian supply outages and tight global markets for diesel and heating oil, the U.S. dollar's rebound has capped gains as commodities priced in the greenback become relatively more expensive for holders of other currencies.
'Clearly the current spike in oil prices has been sharp and furious and with little in the way of fresh impetus and lack of supporting fundamentals a retracement must surely be on the cards,' said Bank of Ireland (Dublin: BIR.IR - news) analyst Paul Harris (PAUHQ.PK - news) . 'That said, in current conditions it is difficult to call exactly when the bearish elements will prevail. More importantly, the key issue is how far that pullback will be, with oil prices below $100 a barrel at this stage a dim and distant memory,' he added.
At 9:38 a.m., New York-traded West Texas Intermediate crude for June delivery was down 58 cents to $122.95 a barrel, having yesterday hit a record high of $123.93 a barrel.
In London, Brent crude for June delivery was down 55 cents at $121.77, having yesterday touched an all-time record of $122.37.
Wednesday's weekly report of U.S. fuel stocks figures provided the spur for yesterday's price jump, with distillate stocks declining by 100,000 barrels against market expectations for a 1.3 million barrel gain.
However, crude and gasoline inventories rose by more than expected, with a massive 5.7 million barrel rise in crude stockpiles trumping market estimates for just a 2 million barrel build, weighing on prices.
Gasoline inventories rose by 800,000 barrels, against market expectations for a fall of 200,000 barrels.
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