Oil drops on stronger dollar


NEW YORK (Reuters) – Oil prices tumbled on Thursday as the dollar strengthened on renewed Euro zone credit worries, though fears remained that prolonged conflict in Libya could do long-lasting damage its oil infrastructure.
Data showing that China, the world’s second largest oil importer, unexpectedly posted the largest trade deficit in seven years also weighed on oil prices, analysts said.

U.S. crude for April delivery fell faster than its counterpart Brent crude, falling $2.96 to $101.42 a barrel.

Data showing new U.S. jobless claims rose last week and the country’s trade deficit widened in January sparked economic growth worries and weighed on U.S. crude.

U.S. crude’s losses extended from Wednesday, when data showed crude inventories rose well more than expected last week, with stocks at the key Cushing, Oklahoma, delivery hub hitting a record.

In London, April Brent crude dropped $1.75 to $114.19 a barrel.

Brent’s premium against U.S. crude again shot up, rising to more than $13, after posting above $11 on Wednesday. The premium hit a record above $17 last week.

Investors watch the changing fortunes of both contracts as they trade heavily on the spread between them.

The euro fell against the dollar after rating agency Moody’s downgraded Spain’s credit, sparking negative sentiment toward struggling sovereign borrowers in Europe.


China suffered a $7.3 billion trade deficit in February as the Lunar New Year holiday slowed exports and spurred anxieties about global economic growth, though economists said the sudden drop was likely to be temporary.

But China’s crude oil imports rose to the third highest level on record on a daily basis as refiners ramped up operations despite a lull in demand lull during the holidays.

In Libya, state television said government forces had cleared Ras Lanuf of «armed gangs,» a reference to rebels, but rebel soldiers denied the eastern oil town had fallen to Muammar Gaddafi’s troops.

«The large explosions and enormous columns of smoke from storage tanks and other facilities in Ras Lanuf, close to the Es Sider terminal, are perhaps more than merely symbolic,» Barclays Capital oil analysts headed by Paul Horsnell said.

«They represent a final fading of any residual realistic hope that the outage of Libyan oil could prove to be anything other than prolonged.»

An official from the Libyan oil company AGOCO told Reuters the company was making arrangements to market oil directly to foreign buyers, instead of through its state-owned parent, National Oil Corp.

The port of Brega has run out of crude oil stocks, forcing crude tankers to cancel shipments or travel to Saudi Arabia, a source told Reuters.


International pressure continued to mount on Libya after Russia said it would ban all weapons sales to the North Africa nation, while Germany ordered a freeze on bank accounts held by the Libyan central bank and the Libyan Investment Authority.

Confirming previous non-Libyan estimates, Shokri Ghanem, chairman of Libya’s National Oil Corp, said production had been cut to about half a million barrels per day from 1.6 million bpd by the war, as many foreign and local workers left oilfields.

To cool down market anxiety, Saudi Arabia has increased production to 9 million bpd, almost 1 million bpd above its OPEC target. The kingdom says it holds spare capacity of 3.5 million bpd.

Still, an OPEC member said Wednesday it saw no need for an emergency meeting to discuss raising output.

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