Oil May Fall on Declining Equities, Rising Dollar, Survey Shows

By Blake Ellis

Oct. 30 (Bloomberg) -- Crude oil may fall next week on speculation that the dollar will rebound against the euro and equities will decline.

Fifteen of 34 analysts, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast that futures will be little changed. Last week, 50 percent of analysts said prices would fall.

“I’m looking for a continuation of the rally in the dollar and weakness in equities,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “It’s starting to look like we have a major correction in store for us next week.”

A rising U.S. currency curbs demand for raw materials as an inflation hedge. Declining equities can signal the economy will be slow to recover, reducing consumption.

The Standard & Poor’s 500 Index dropped 4.6 percent to 1,042.63 in the four trading days ended Oct. 28. The dollar touched $1.4683 per euro yesterday, the strongest intraday price in more than two weeks.

The U.S. currency weakened and stocks rebounded in later trading after the U.S. Commerce Department said gross domestic product grew at a 3.5 percent pace from July through September after shrinking for four straight quarters.

Crude oil for December delivery fell 63 cents, or 0.8 percent, to $79.87 a barrel so far this week on the New York Mercantile Exchange. Futures are up 79 percent this year.

The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.

     Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                   RISE      NEUTRAL    FALL
                    10         9         15

To contact the reporter on this story: Blake Ellis in New York at bellis9@bloomberg.net