NEW YORK – Oil futures extended their slide Tuesday, dipping below $100 at times as the dollar gained ground, making commodities such as energy futures less attractive to investors seeking a hedge against inflation.
Retail gas prices, meanwhile, slipped slightly from the record they set one day earlier.
Investors who previously bought commodities such as oil as a haven against inflation and a falling dollar were selling Tuesday as the greenback strengthened against the euro and other currencies. The stronger dollar also made oil more expensive to overseas investors.
Many analysts believe oil investors have taken most of their price cues in recent months from gyrations in the dollar.
“The dollar’s stronger, and (therefore) oil’s weaker,” said Brad Samples, an analyst with Summit Energy Services Inc., in Louisville, Ky.
Light, sweet crude for May delivery fell $1.73 to $99.85 a barrel on the New York Mercantile Exchange. Oil futures fell $4.04 a barrel on Monday.
While the dollar was driving oil prices on Tuesday, Samples and other analysts believe the market is also beginning to focus more closely than it has in months on fundamentals such as rising supplies and falling demand. The second quarter of the year, which began Tuesday, is typically the weakest for petroleum demand. The country’s appetite for oil and gasoline have fallen sharply since January, and oil supplies have mostly risen in recent weeks.
“Weak demand in the U.S. is one of the primary reasons that the fundamentals may be on the verge of taking center stage as the primary driver of prices,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note.
Economic data also weighed on oil prices Tuesday. The Institute for Supply Management reported that manufacturing continued to weaken in February, and the Commerce Department said overall construction activity fell last month for the 24th straight month.
Many analysts have long argued that dollar-induced buying has driven oil prices far beyond levels that can be justified by supply and demand or economic conditions. However, few are willing to call an end to crude’s bull run, noting that prices have dipped below $100 several times in recent months, only to rebound and surge higher.
Soaring crude prices have sent fuel prices higher, despite falling demand. At the pump, the national average price of a gallon of gas slipped 0.1 cent Tuesday to $3.286 a gallon, according to AAA and the Oil Price Information Service. While that’s a slight retreat from Monday’s record, gas prices remain 60 cents higher than a year ago, and are expected to rise as high as $3.50 or $4 a gallon this spring as suppliers stock up in advance of peak summer driving season.
Other energy futures also fell Tuesday. In other Nymex trading, May heating oil futures fell 4.37 cents to $2.8624 a gallon while May gasoline futures fell 2.01 cents to $2.607 a gallon. May natural gas futures fell 20.9 cents to $9.892 per 1,000 cubic feet.
In London, May Brent crude rose $1.09 to $99.21 a barrel on the ICE Futures exchange.
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