Brent oil price dips to $90 as US dollar strengthens

8 December 2010 8 December 2010

BonTrade

Brent oil prices open Wednesday’s trading session lower, near $90 a barrel as the US dollar once again strengthens in currency markets, as seen by movements on the ICE Dollar Index, putting pressure on oil futures and other commodities.

Latest Brent Oil Price

In London, Brent crude oil futures for January 2011 delivery was trading at $90.47 a barrel, 06.30 GMT this morning on the ICE Futures Exchange.

Meanwhile, the ICE Dollar Index, which tracks the US dollar against the currencies of six major US trading partners, climbed back over 80 to 80.235. A stronger US dollar typically weakens the price of oil because it makes the commodity more expensive to buy with weaker currencies.

Europe Debt Issues Continue

And European Union finance ministers wrapped up talks in Brussels after which they announced that there was no need to boost the size of an emergency fund for countries overwhelmed by public debt and deficits. The remarks did little to convince investors that eurozone leaders will be able to prevent the sovereign debt crisis from spreading to Spain and Portugal.

Oil futures are also under pressure on rising yields in US Treasuries amid receding concerns over deflation there.

“A spike on US Treasury yields now takes center stage of the foreign exchange market, giving a strong impetus to buy the US dollar.” said Minoru Shioiri, chief manager of FX trading at Mitsubishi UFJ Morgan Stanley.

Oil Prices – Technical Selling

“It’s technical selling. This market’s made a hell of a run in the last two weeks.” said Mark Waggoner, president of Excel Futures, on oil’s midday retreat.

“It is not surprising. It is primarily profit taking after crude oil prices breached the $90 level.” said Victor Shum, at Purvin & Gertz in Singapore.