Oil dips below 83 dollars in Asian trade

Tuesday, 19 October 2010 23:41 -     - {{hitsCtrl.values.hits}}

SINGAPORE, (AFP) - Oil dipped below 83 dollars a barrel in Asian trade Tuesday as concerns over the US economic recovery weighed on sentiment, analysts said.

Modest gains in the US dollar also helped push prices lower as a stronger greenback makes the dollar-denominated commodity more expensive and leads to lower demand.

New York’s main contract, light sweet crude for November delivery was down 20 cents at 82.88 dollars a barrel in morning trade.

Brent North Sea crude for December delivery was 40 cents lower at 83.97 dollars.

New York prices had gained sharpy Monday on worries that an ongoing strike in France would disrupt European supplies.

“The trading pattern has been that when oil futures on the New York Mercantile Exchange hit 83 dollars, there’s considerable resistance,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

He said an unexpected drop in US industrial production in September added to concerns about the recovery of the world’s biggest economy from recession.

US industrial output fell 0.2 percent in September, wiping out a 0.2 percent gain in August, according to the Federal Reserve’s monthly report.

The decline surprised most analysts, whose consensus forecast was for another rise of 0.2 percent.

It was the first time industrial production had fallen since a 0.2 percent decline in June 2009, the month the recession in the United States ended.

Shum said the drop in industrial production plus another report showing improved home-builder confidence indicates that the US economic rebound is “uneven and that is tempering some of the bullish sentiment in oil”.

He said that for the near term, the main drivers for the market will be the value of the US dollar and equity markets.

Currencies and equities in Asia have gained sharply against the dollar due to an influx of funds from the developed world into emerging markets, where returns are higher.