Brent oil trading steady over $91 on weaker US dollar

9 December 2010 9 December 2010

BonTrade

Brent oil futures open Thursday’s trading session steady at $91 a barrel as oil prices continue to profit from the US dollar, as seen by weakness on the ICE Dollar Index.

Latest Brent Oil Price

In London, Brent crude oil futures for January 2011 delivery was trading at $91.33 a barrel, 06.30 GMT on the ICE Futures Exchange.

Meanwhile, the ICE Dollar Index, which tracks the US dollar’s performance against a basket of six major world currencies, declined to 79.770 in trading this morning.

Sinking Feeling Dampens Dollar

“Everybody is still focusing on US bond yields. We are near a selling climax in US Treasuries. Such a feeling is also in the market, dampening the dollar now.” said Koichi Yoshikawa, head of forex trading at BNP Paribas in Tokyo.

A stronger US dollar tends to weigh on the price of oil and other dollar denominated commodities.

Analysts noted that from Tuesday, the oil price structure has normalised further after a dramatic switch on Friday and Monday to backwardation, in which crude deliveries in the near future have higher prices than those later on. When prices are higher for the later months, the situation is called contango.

“The rapid reversal of structural contango positions has now given way to a more measured response to tighter market conditions.” said Lawrence Eagles, analyst at JP Morgan in New York.

Oil Prices – Short Term Forecast

Both Brent and WTI oil prices remain poised to climb higher in the short term.

Technical analysis of the future direction of the US dollar and the price of oil suggest that the near term pattern for each should be somewhat choppy but with a favourable upward bias for oil prices.