Dollar Rally
The dollar climbed to the highest level against the euro in almost three months after Italian elections this week delivered a four-way parliamentary split. The U.S. currency rose above $1.50 against the pound for the first time since July 2010. A stronger dollar curbs the appeal of raw materials to investors.
“We’re seeing a lot of flight into the dollar since the Italian election,” Kilduff said. “The pound broke through $1.50 today, which is a very important level.”
The Standard & Poor’s GSCI Index of 24 commodities fell as much as 1.3% to 640.03, the lowest level since Dec. 31.
Output by members of the Organization of Petroleum Exporting Countries climbed as a gain by Libya outweighed a cut by Saudi Arabia, the Bloomberg survey showed. Libyan daily production increased by 130,000 barrels to 1.24 million last month, the biggest gain of any member, after the reopening of the country’s Zueitina export terminal early in February.
Saudi Production
Saudi Arabia, OPEC’s biggest producer, pumped 9 million barrels a day, the least since May 2011, according to the survey. Output was down 100,000 barrels from January and 900,000 barrels from May, when production reached the highest since at least January 1989.
“We’re seeing oil be more conservatively priced, but we still aren’t at fair value,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The fundamentals support a price in the $80-to-$85 area.”
U.S. crude inventories increased 1.13 million barrels to 377.5 million last week, the highest level since July, a Feb. 27 Energy Information Administration report showed. Output climbed to 7.12 million barrels a day in the week ended Feb. 15, the most since August 1992.
“The fundamentals didn’t justify the high level of oil prices,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “The fundamentals are reasserting themselves.”
Market ‘Length’
Net-long positions in West Texas Intermediate oil held by money managers, or wagers on rising prices, climbed to 221,534 in the week ended Feb. 15, the highest level since March 2012, according to the Commodity Futures Trading Commission’s Commitments of Traders report.
“One has to remember that there was an awful lot of length in the market,” Evans said. “We’re seeing massive reversal now, which is putting pressure on futures.”
Electronic trading volume on the Nymex was 453,728 contracts as of 2:37 p.m. It totaled 455,826 contracts yesterday, 14% below the three-month average. Open interest was 1.66 million contracts.