Weak Fundamentals Weigh on Oil Price



In electronic trade on Monday, oil futures fell further, adding to heavy losses suffered at the end of the previous week. Rising U.S. dollar and negative sentiment are cited as the most important reasons for the crude oil price slump.

Benchmark U.S. crude oil for August delivery lost 45 cents, or 0.5%, to $93.24 a barrel during Asian trading hours. This comes after loses of 1.5% last Friday. As of Thursday, previous front-month contract plunged 2.9% on the New York Mercantile Exchange.

August futures for London-traded Brent crude gave up 52 cents, or 0.5%, to $100.39 a barrel.

The recent losses for crude futures has come amid strong gains for the dollar, which extended its advance Monday as the ICE dollar index rose to 82.625 from late Friday’s 82.302.

A strong dollar weighs on oil and other commodities due to the fact they are all priced in U.S. dollars. After U.S. Federal Reserve Chairman Ben Bernanke signaled the end of the financial stimulus program, investors demonstrate renewed interest in the US Dollar.

Oil’s recent tendency to rise and fall with U.S. stocks seems to have ended, and even correlation with the dollar is weaker than before.

However, now market participants recognize that weak fundamentals matter more.

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