Stronger Dollar And Weak Demand Outlook Hit Oil

Crude fell Monday as the U.S. dollar strengthened against major currencies. OPEC released its monthly report ahead of a key summit on May 31, showing that global oil demand is still weak and will remain so throughout 2013.

The dollar rose to a fresh 4 1/2-year high against the yen on speculation the Feds could reduce aggressive monetary stimulus following strong data on the U.S. labor market. The stronger dollar makes crude and other commodities less appealing to investors.

Meanwhile, the Organization of the Petroleum Exporting Countries showed in its monthly report that demand in the first quarter of the year grew less than expected as it scaled back previous predictions of growth for the year.

“A strength in the dollar is weighing on commodities. For oil, worries of ample supplies is putting pressure. We have unprecedented levels of stockpiles in the United States, with uncertainty surrounding economic growth”, said Ben Le Brun from OptionsXpress.

- Crude oil is trading around the $95.30 a barrel after falling 0.77% or $0.74

- Brent is trading around $103.19 a barrel after falling 0.69% or $0.72

Focus turned today to China as it released its industrial production, retail sales and fixed asset investment. Traders were looking for clues on the strength of recovery in the world`s second largest oil consumer.

Industrial production rose 9.3% in April, below the median estimate of 9.4%. Retail sales rose 12.8%, matching the market’s expectations. The fixed asset investment rose 2.06% in April from the forecast 21.0%.

The U.S. economy is expected to grow at a slower pace in the second and third quarters. According to the Philadelphia Fed`s survey, the U.S. economy might grow at an annual rate of 1.8% in the current quarter, down from a previous estimate of 2.3%.

The decline in the U.S. retail sales expected for the month of April is weighing in on prices. Later this day, the report may show that retail sales declined for the second straight month, reflecting weak demand for automobiles.

- Natural gas is trading at $3.895 per cubic feet after falling 0.38%

- Gasoline is trading at $2.8397 a gallon after falling 0.72%

- Heating oil is trading at $2.8893 a gallon after falling 0.58%

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