In New York crude oil was little changed around $78 a barrel before a report forecast to show that U.S. crude inventories expanded for a third week.
An Energy Department report due tomorrow will probably show that U.S. stockpiles of crude oil rose 1.5 million barrels last week, according to a Bloomberg News survey. Analysts forecast that supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, declined last week.
“It’s overvalued and it may be time for a correction,” said Carsten Fritsch, an analyst with Commerzbank AG in Frankfurt. “The fundamental picture is bearish. Demand outside China is still weak and global stockpiles are ample.”
Crude oil for December delivery was at $78.55 a barrel, down 13 cents, at 8:49 a.m. London time. Yesterday, it dropped 2.3 percent to close at $78.68 a barrel on the New York Mercantile Exchange, the biggest decline since Sept. 24 and the lowest settlement since Oct. 16.
Prices have gained 76 percent this year and reached a one- year high of $82 a barrel on Oct. 21, Bloomberg reports.
Meanwhile, oil earlier also declined after OPEC’s president said the group may boost production targets at its meeting in December as prices climbed above $75. Crude oil surged to a one-year high of $82 a barrel last week.
“The rally will not sustain,” said Clarence Chu, a trader with options dealers Hudson Capital Energy in Singapore. “Eventually oil should go back down towards $70. Demand hasn’t really come back.”
Crude oil for December delivery was at $78.79 a barrel, up 11 cents, at 3:18 p.m. Singapore time. Yesterday, it dropped $1.82, or 2.3 percent, to close at $78.68 a barrel on the New York Mercantile Exchange, the biggest decline since Sept. 24 and the lowest settlement since Oct. 16. Prices have gained 76 percent this year and reached $82 a barrel on Oct. 21.
The dollar dropped to $1.4904 per euro as of 6:25 a.m. in London from $1.4876 yesterday in New York. The greenback reached $1.5063 yesterday, the weakest level since August 2008.
“The range for crude has changed to $75-$85, moved up, and the upper limit is at $82 at the moment,” said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. "Unless there is a collapse in the economy, this market would be supported at around $75 a barrel," Bloomberg reports.
It was also reported, the euro touched a 14-month high of $1.5061 on Monday before closing at $1.4861. The euro strengthened to $1.4894 in Asian trading while the dollar fell to 92.02 yen from 92.21.
"A weakening dollar could put significant pressure on dollar-denominated oil prices in the months ahead," Bank of America Merrill Lynch said in a report. "The combination of surging money supply, a rapidly weakening dollar and a cyclical improvement in oil demand could push oil prices above $100."
Some economists, such as Jorg Zeuner of Liechtenstein-based VP Bank, expect the dollar and oil to stabilize over the next three to six months as inflation fears ease. And burgeoning inventories will likely satisfy any boost in demand triggered by a recovering global economy.
"We expect producers to increase output if prices keep rising," Zeuner said. "We don't think producers would risk killing the recovery by letting prices go to $100." The Associated Press reports.