By Timothy Puko
Oil futures flipped down sharply Wednesday, influenced by a dollar that rose after new data showed U.S. demand for long-lasting manufactured goods rose in October at the fastest pace in a year.
U.S. crude oil for January delivery recently fell 33 cents, or 0.7%, to $47.71 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 32 cents, or 0.7%, to $48.80 a barrel on ICE Futures Europe.
A rising dollar makes dollar-denominated commodities like oil more expensive for traders who are based in countries using other currencies, and those commodities often fall as the dollar rises. Oil and the dollar have had an especially strong tie during large stretches of the past year, and a rising dollar has been one of the biggest factors pulling oil back from the highs it hit in mid-October.
Orders for durable goods -- products designed to last longer than three years, such as trucks, computers and metals -- rose 4.8% to a seasonally adjusted $239.4 billion from a month earlier, the Commerce Department said Wednesday. The rise was nearly double what analysts expected.
The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, recently gained 0.7% to 91.94, its highest level since January. The ICE Dollar Index hit its highest point since 2003.
Many traders have also been wagering on whether the Organization of the Petroleum Exporting Countries can strike a deal to cut production when its members meet Nov. 30 in Vienna. But few new developments have come out about those talks since late Tuesday, leaving the dollar as the biggest factor to influence Wednesday's trade.
"The U.S. dollar is tearing away. That's a massive headwind," said Tariq Zahir, who oversees $8 million as managing member of Tyche Capital Advisors LLC.
Traders are also watching for the U.S. Energy Information Administration's weekly report on inventory data due later Wednesday morning. A glut of oil in storage around the world has been another big factor sending oil prices lower in recent weeks.
Analysts polled by The Wall Street Journal expect another 800,000-barrel rise in inventories for the week ended Nov. 18. On Tuesday, the American Petroleum Institute reported a 1.3 million-barrel decrease in crude inventories during the week, though it did report a 2.7 million-barrel increase in gasoline stockpiles.
While that data could be influential, the dollar is so strong that it could eclipse the inventory figures unless it shows something wildly different from expectations, a trader and analyst said. The expected changes are relatively small, and many traders will also be out or leaving early because of the Thanksgiving holiday, which is likely to limit moves later in the afternoon, especially compared with moves in the morning, they said.
"In a thin market, things like the dollar are going to carry more sway," said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston.
Sticking points also remain for OPEC in its attempts to strike a deal, including questions over production data and Iran's output plans, a Nigerian delegate told The Wall Street Journal. Those kinds of issues have made traders skeptical, especially after several past rallies have failed because OPEC's prior attempts at cooperation failed to materialize.
OPEC's market share of global production is currently around 37.6%, so the cartel will need to bring in other producers to maximize the impact of any deal, said Georgi Slavov, the global head of energy at Marex Spectron.
One of the biggest producers outside OPEC, Russia, has signaled a willingness to cooperate with OPEC. Earlier in the month, Russian Energy Minister Alexander Novak said Moscow could freeze crude production at November levels, though the country has failed to follow through on similar deals in the past.
Gasoline futures recently gained 0.5% to $1.4163 a gallon. Diesel futures gained 0.5% to $1.5334 a gallon.
Neanda Salvaterra, Dan Strumpf, Eric Morath, Anna Louie Sussman and Chelsey Dulaney contributed to this article
Write to Timothy Puko at email@example.com
(END) Dow Jones Newswires
November 23, 2016 10:23 ET (15:23 GMT)
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