Oil prices tumble on dollar rally

A motorist filling up his vehicle at a petrol kiosk. (AFP/Federico Parra)

NEW YORK: A stronger dollar pushed oil prices sharply lower on Tuesday (Mar 10), adding to fierce pressure on the market from a global supply glut.

US benchmark West Texas Intermediate for delivery in April tumbled US$1.71, settling at US$48.29 a barrel on the New York Mercantile Exchange. In London, Brent North Sea crude for April dived US$2.14 to US$56.39 a barrel. The global benchmark has fallen in six of the last seven trading sessions.

The dollar surged against other major currencies, hitting a nearly 12-year high against the euro, on worries over Greece's debt negotiations and expectations the Federal Reserve will increase interest rates soon.

"Obviously the strength of the US dollar is finally catching up with the oil market," said John Kilduff of Again Capital, noting that the greenback's rally also was hitting the equities markets and especially oil industry shares.

The Dow Jones Industrial Average was down 1.6 per cent in late-afternoon trade, while London's FTSE 100 shed 2.5 per cent. A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies, denting demand.

"Weak CPI data from China and worry over Greek economic reforms contributed to this background weakness," said Tim Evans, an analyst at Citi Futures.

Market-watchers generally predicted the amply supply would only get worse, in part because demand would ease somewhat with the onset of spring in the northern hemisphere.

The US Department of Energy's market outlook report released on Tuesday projected for this year "continuing large builds in US crude oil inventories, including at the Cushing, Oklahoma storage hub."

With US oil production ramped up, commercial crude stockpiles recently have hit record highs week after week. The next DoE weekly petroleum inventories report, due Wednesday, was expected to show another increase.