Crude oil dropped for a second day on the assumption that its dollar-driven rally to a seven-month high last week outpaced prospects for a recovery in fuel demand.
Crude oil for July 2009 delivery fell as much as 64¢, or 0.9%, to $71.40 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was traded at $71.44 a barrel at 11.25am in Singapore.
Qatar Oil Minister Abdullah bin-Hamad Al-Attiyah said that OPEC members are waiting for indications of economic recovery and are unlikely to raise production when the group next meets in September 2009.
"There has been more expectations that a correction is long overdue," said Victor Shum, a senior principal at consultants Purvin & Gertz in Singapore. "The US dollar has strengthened and that has helped push the sentiment towards selling oil a bit."
The contract dropped 0.9% to $72.04 a barrel on 12 June, 2009 its first drop in four days, after a worse-than-expected plunge in European industrial production dented confidence in the global recovery and increased the dollar, decreasing the investment appeal of commodities. Oil reached $73.23 on 11 June 2009, the highest since 21 October 2009.
"Some of these commodities have put on some pretty solid gains without really much fundamental basis," said Toby Hassall, research analyst at Commodity Warrants in Sydney. "Oil is vulnerable to some corrective action, especially if we see further strength in the dollar."
New York oil futures have increased 46% in the past two months, as the dollar dropped 5.6% against a basket of six main currencies.
The dollar increased for a second day today, trading at $1.3984 to the euro in early Asian trading, from $1.4016 late in New York last week.
Higher US retail gasoline prices may begin to crimp demand for the fuel even as the country enters the summer travel season.
Brent crude for July 2009 delivery dropped as much as 51¢, or 0.7%, to $70.41 a barrel on London's ICE Futures Europe exchange. The contract, which expires on 15 June 2009, dropped 87¢, or 1.2%, to settle at $70.92 a barrel on 12 June 2009.
The more actively traded August 2009 contract dropped as much as 50¢, or 0.7%, to $71.30 a barrel.