USD 92.2628

-0.33

EUR 99.7057

-0.56

Brent 86.92

+0.03

Natural gas 1.751

-0

754

Crude Declines From Five-Month High

Oil dropped, erasing earlier gains, as traders bet that crude’s rally to a five-month high had left oil too expensive while a rebound in the dollar reduced the appeal of commodities to investors.

Crude Declines From Five-Month High

Oil earlier reached its highest price since May after a report showed U.S. gasoline inventories dropped last week by the most since May 2009. The Energy Department may say today that crude supplies rose by 413,000 barrels, a Bloomberg News survey shows. Oil’s 14-day relative strength index rose above 70, a sign that prices may drop after rising too far, too fast.

“There is some optimism in the market that inventories are decreasing and the oversupply is shrinking,” said Sintje Diek, an HSH Nordbank analyst in Hamburg. “This is an overreaction by the oil market. The higher prices are not sustainable.”

Crude for November delivery traded at $82.54 a barrel, down 28 cents, or 0.3 percent, in electronic trading on the New York Mercantile Exchange at 12:04 p.m. London time. It earlier climbed as much as 51 cents to $83.33 a barrel, the highest price since May 4. Brent crude for November settlement traded at $84.47 a barrel, down 37 cents, on the ICE Futures Europe exchange in London.

New York futures rose 1.7 percent yesterday after the Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the U.S. economy, climbed to 53.2 from 51.5 in August. Economists surveyed by Bloomberg News projected the index would advance to 52.

Crude’s 14-day relative strength index, a measure of how fast prices have risen or fallen in that period, was at 70.1 today. A reading of 70 or more can be taken as a sign that a market is “overbought” and prices may drop.

Inventory Reports

U.S. crude stockpiles climbed by 4.44 million barrels last week, the biggest gain in five weeks, the American Petroleum Institute said. Today’s Energy Department report may show inventories rose by 413,000 barrels, based on the survey.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

The dollar was at $1.3842 against the 16-nation euro after sinking to $1.3881, the lowest rate since Feb. 4. A weaker U.S. currency bolsters the investment appeal of commodities.

Crude prices may reach $85 to $95 a barrel by the end of this year as stockpiles decline in the U.S., the world’s biggest oil-consuming nation, according to Goldman Sachs Group Inc.

U.S. supplies may fall because of demand for products from emerging markets including China, Goldman said in a report yesterday. An economic recovery will probably cause inventories to decline to “more normal” levels by early 2011, it said.

“While U.S. implied oil demand remains firm, we believe that the decline in U.S. net oil imports is the main driver of the draw on U.S. total petroleum inventories,” wrote Goldman analysts, led by New York-based David Greely. “Strong growth in emerging-market demand is beginning to tighten the U.S. supply- demand balance.”


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