Brent oil price dips under $94 on stronger US Dollar Index

7 January 2011 7 January 2011

BonTrade

Brent oil prices open Friday’s trading session lower, near $94 a barrel as the US dollar gains more strength, as seen by upward movements on the ICE US Dollar Index.

Latest Brent Oil Price

In London, Brent crude oil futures for February 2011 delivery was trading at $93.88, 05.20 GMT this morning on the ICE Futures Exchange.

Meanwhile, the ICE Dollar Index, which tracks the US dollar against six major world currencies, was at 80.825 from 80.217. A stronger US dollar tends to limit oil futures and other commodities appeal as an alternative investment.

Eurozone Debt Concerns Boost US Dollar

Fresh concerns about a potential move by the EU to spread bailout costs to senior bond holders has pushed banks to be more reluctant to lend to each other, traders said. Oil prices are being pressured by the strengthening US dollar versus the euro.

“We are falling back into this old correlation with the dollar. This weakening euro may be portending a more significant concern with regard to the financial system in Europe.” said Bill O’Grady, chief market strategist at Confluence Investment Management, St. Louis.

Oil Bull Market Still in Force

“This oil market is definitely in the need of a short term correction. Longer term, I think the bull market is still in force.” said Mike Zarembski, senior commodities analyst at OptionsXpress in Chicago.

Most analysts have forecast that both WTI and Brent oil prices will pierce the $100 level this year, but others expect global economic growth to weaken in 2011, dragging on crude oil demand.