Singapore-(Reuters)- Oil fell towards $82 on Tuesday, under pressure from an expected gain in US crude stockpiles for three out of four weeks and a stronger dollar, as the currency's volatility exposed the market to price swings.
Crude pared early losses as the dollar retreated from session highs, then fell back as the greenback recovered, with markets focused on the US Federal Reserve carrying out a fresh round of monetary stimulus as early as next week.
US crude for December fell 39 cents to $82.13 at 0247 GMT, after earlier dipping by as much as 0.6 per cent to $82.05 a barrel, still less than $3 from a five-month high of $84.43 on Oct. 7. ICE Brent slid 25 cents to $83.29. "It could be the oil market is just taking a breather and will just trade range-bound today," said Serene Lim, a Singapore-based oil analyst at ANZ.
"But there is still so much talk of quantitivate easing and excess liquidity coming into the market and that will push commodities higher. We still have high commercial inventories and high OPEC spare capacity, so that will be capping investors' appetite for oil."
The inverse correlation between the dollar and oil has become deeply entrenched over the past few days as investors buy emerging-market shares whenever the greenback drops.
Consequently, the direct correlation between US crude and the euro on Monday jumped to its highest since March, after investors calculated that a Group of 20 meeting that produced no firm policy initiatives would leave market trends unchanged.
Oil on Monday climbed as the dollar weakened and sales of previously owned US homes rose a greater-than-expected 10 per cent in September, though they remained at depressed levels that point to a painful and protracted recovery for the housing market.
Rising US supplies
Crude stockpiles in the US probably rose by 1.4 million barrels the week ended Oct. 22 as imports piled up, a Reuters poll showed on Monday.
The gain in crude inventories was likely limited by higher refinery demand as refinery utilization probably rose 0.3 per centage point, to 82.8 per cent of capacity.
Inventories for the two main categories of refined products likely went on opposite directions last week, with distillate stockpiles predicted to have dropped by 1.9 million barrels for a fourth consecutive week of declines and gasoline inventories seen rising by 500,000 barrels for a second straight week of gains.
Prolonged strikes in France probably dragged larger amounts of distillate fuel from the US, contributing to the expected stockdraw, analysts said.