Oil prices slip as U.S. dollar strengthens

By Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch) —

Futures for benchmark U.S. crude-oil lost ground Tuesday, with a stronger U.S. dollar tugging prices away from their best level in more than a year.

Crude for August delivery CLQ3 -0.38% shed 7 cents to $103.07 a barrel in electronic trade.

Oil on Monday fell 8 cents, or 0.1%, on the New York Mercantile Exchange as investors weighed the impact of a rising dollar on prices against violence in Egypt, which has left at least 50 people dead and hundreds injured in clashes between Egyptian security forces and supporters of ousted former Egyptian president Mohammed Morsi.

Oil futures extend their losses from Monday as the U.S. dollar moves higher.
Although Egypt isn’t an oil producer, the country controls the Suez Canal, which connects the Mediterranean and Red seas and is considered a key route for transporting crude oil produced in the Middle East and North Africa.

“With the recent collapse of the Egyptian government, and Syria still embroiled in a civil war, there is the potential for more unrest,” said BlackRock global chief investment strategist Russ Koesterich in a note to clients Monday.

Political and “terrorism risks have already impacted oil production in several countries, including Nigeria, Iran and Iraq,” said Koesterich. “Fortunately, rising U.S. production has offset these losses, but oil prices are creeping higher, and any further disruption in production would likely send them higher still.”

Oil price moves were limited Tuesday as the U.S. dollar advanced, as measured by the ICE dollar index DXY +0.19% , which tracks the U.S. unit against six other major currencies.

The index hovered at a three-year high on expectations that the Federal Reserve will slow the pace of monetary stimulus to the economy. Analysts have said the asset purchases have hurt the dollar’s value.

Strengthening in the greenback can make dollar-denominated oil futures more expensive for holders of other currencies.

Click to Play
Egypt clashes leave dozens dead
Bloodshed follows in the wake of the ouster of Egyptian President Mohammed Morsi.Photo: AP.

Oil prices last week jumped nearly 7% in the wake of political unrest in Egypt. On Monday, Egypt’s interim president Adly Mansour said an amended constitution would go to a national vote for approval within the next five months, with new presidential and parliamentary elections likely for early 2014, according to reports.

As well as watching developments from the Middle East, investors will monitor U.S. crude-oil supply data due this week.

In data for the week ended July 5, Citi Futures said it expects to see some recovery in U.S. imports from Canada, but it also anticipates a further overall stock decline of roughly 4 million barrels to 6 million barrels.

The Energy Information Administration last week said crude-oil supplies dropped by 10.3 million barrels for the week ended June 28, more than three times the amount expected by analysts polled by Platts.

In other energy trading Monday, August Brent oil UK:LCOQ3 -0.37% fell 31 cents, or 0.3%, to $107.12 a barrel on ICE Futures.

August natural gas NGQ13 -1.18% slipped 1 cent to $3.73 per million British thermal units. August gasoline RBQ3 -0.16% remained at $2.88 a gallon, and August heating oil HOQ3 -0.32% held at $2.98 a gallon.

Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.

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