Crude Prices Fall As Greenback Strengthens

NEW YORK—Oil futures declined as the U.S. dollar strengthened and traders weighed the impact of Osama bin Laden's death on the crude market.

Light, sweet crude for June delivery fell 68 cents, or 0.6%, to $112.84 a barrel on the New York Mercantile Exchange in morning trade. Brent crude on the ICE futures exchange fell $1.04, or 0.8%, to $124.08 a barrel.

Investors sought safety in the dollar amid worries of reprisals following bin Laden's death at the hands of U.S. forces Sunday. Though no specific threats have been issued, market participants are moving out of riskier currencies like the euro and the Australian dollar.

A stronger dollar tends to weigh on oil prices as the dollar-denominated commodity becomes more expensive to holders of other currencies.

The ICE Dollar Index, which tracks the greenback against a basket of major currencies, rose 0.1% to 73.107.

"We expected the Dollar Index to be a key trading input this week," said Olivier Jakob, head of the Swiss consultancy Petromatrix.

Crude's decline follows a day of volatile price swings, with Nymex crude trading in a $4 range Monday as traders digested the news of bin Laden's death. The contract hit a 2½-year high of $114.83 a barrel before settling lower.

The event raised two competing viewpoints: that those loyal to bin Laden might attack U.S. interests or global oil supplies; or that it ushers in a period of greater stability.

However, many analysts are concluding that any impact is likely to be indirect, affecting the currency or other markets first. The al Qaeda leader had been marginalized in recent years, and the popular uprisings in North Africa and the Middle East are likely to remain a more potent geopolitical threat than al Qaeda to oil prices.

"Given the persistent unrest in the Middle East-North Africa region, there's still more of an upside" to oil prices, said James Zhang, commodity strategist at Standard Bank in London. "Although bin Laden's death captured the news headlines in the short term, there's limited impact on the oil market."

Market participants are also more concerned about fundamental indicators, such as the pace of the economic recovery in the U.S., the world's largest oil consumer. Following last week's disappointing first-quarter growth figures, traders will be paying close attention to Friday's nonfarm payrolls report for signs of improvement in the labor market.

Additional clues about U.S. oil demand will come later Tuesday with the first of two reports on oil and fuel product inventories. The American Petroleum Institute, an industry group, will release its inventory survey at 4:30 p.m. Tuesday. The more closely watched Department of Energy report will be released Wednesday at 10:30 a.m.

Analysts expect an increase of oil supplies of 1.9 million barrels in the data covering the week ended Friday, according to a survey by Dow Jones Newswires. Gasoline supplies are seen rising by 300,000 barrels, while supplies of distillates, including heating oil and diesel, are seen climbing 800,000 barrels.

(Source: http://online.wsj.com/article/SB10001424052748703922804576300751086480610.html?mod=googlenews_wsj)