Crude Oil Falls From One-Year to High as Dollar Pares Decline

By Rachel Graham and Christian Schmollinger

Oct. 20 (Bloomberg) -- Crude oil fell from a one-year high as the dollar pared losses against the euro and OPEC said it wouldn’t be comfortable with oil at $100.

Oil traded above $80 as the dollar index, which measures the U.S. currency against six major currencies, fell to its lowest since August 2008, boosting the appeal of commodities as a currency hedge. OPEC Secretary-General Abdalla El-Badri said the market is well-supplied with oil.

“We’re seeing weakness in the dollar,” Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich, said by phone from Vienna. “I would be skeptical of a $100 price based on the fundamental picture.”

Crude oil for November delivery fell as much as 55 cents, or 0.7 percent, to $79.06 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $79.17 a barrel at 10:05 a.m. London time.

Earlier, prices rose as much as 44 cents, or 0.6 percent, to $80.05 a barrel in electronic trading on the New York Mercantile Exchange, the first time the front-month contract has traded above $80 since Oct. 14, 2008.

The November contract expires today. The more actively traded December future was at $79.63 a barrel, down 33 cents.

Prices have gained 78 percent this year, accelerating its climb as a recovery in stock markets emboldened investors and the sliding dollar prompted buying of commodities.

The U.S. currency traded as low as $1.4994 per euro, the weakest since August 2008. It then recovered to $1.4959.

‘No Shortage’

El-Badri said he doesn’t expect prices to reach three figures in the near future as there is “no shortage of oil supply.” The rally to more than $80 a barrel was driven by higher equities, the sliding dollar and speculation, he told reporters in London today.

The 125 million barrels of crude oil and oil products including diesel currently in floating storage is a concern for OPEC, he said.

“When we see that floating storage eliminated it means demand is coming,” El-Badri said. “We are seeing an $80 oil price that is a little bit high.”

U.S. gasoline and distillate fuel inventories probably declined for a second week, according to the median of seven estimates from analysts surveyed by Bloomberg News before an Energy Department report tomorrow.

Gasoline stockpiles are expected to have fallen 1.5 million barrels in the week ended Oct. 16. Oil advanced last week after the department posted an unexpected decline in supplies as refineries idled units. The 5.23 million-barrel drawdown was the steepest since Hurricanes Gustav and Ike shut refineries representing about a fifth of U.S. capacity in September 2008.

Heating Oil

Stockpiles of distillate fuels, a category that includes heating oil and diesel, declined 1.5 million barrels from 170.7 million, the survey showed. Crude oil inventories probably increased 1.5 million barrels last week from 337.8 million barrels.

The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington. The industry-funded American Petroleum Institute will put out its data today.

Brent crude oil for December settlement rose as much as 41 cents, or 0.5 percent, to $78.18 a barrel on the London-based ICE Futures Europe exchange. It was at $77.43 a barrel at 10:06 a.m. London time.

To contact the reporters on this story: Rachel Graham in London rgraham13@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.