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Oil slips ahead of API and EIA inventories data as US and European shares decline

9th Mar 2010, 2:23 pm Oil slips ahead of API and EIA inventories data as US and European shares decline

Oil prices fell today ahead of key inventories reports amid a stronger US dollar and a downward movement in global equity markets.

The US dollar gained as the euro declined after Greece asked the US for help with preventing the fiscal situation from worsening by cracking down on hedge funds and currency traders, which Prime Minister George Papandreou believes have contributed to the ongoing crisis. Panadreou said that the consequences of a Greek economic meltdown would spread far beyond the euro zone and have a negative impact on US trade balance.

A stronger US dollar makes crude more expensive for holders of other currencies, curbing the demand and pushing down the price.

Uncertainly over the demand outlook has also contributed as global equity markets were in selling mode today following last week’s rally that fuelled the crude’s surge that saw it eclipse US$82/barrel. The FTSE 100 declined 0.6% today, while the Dow Jones Industrial Average is projected to drop 0.2% in early trade.

April Brent Crude slipped to US$79/barrel on the ICE Exchange, while US light, sweet crude declined to US$80.50/barrel on the New York Mercantile Exchange (NYMEX).

The API (American petroleum Institute) is set to release its inventories data today ahead of a more closely watched inventories report from EIA (Energy Information Administration). A Reuters poll has predicted a sixth straight week of growth in oil stockpiles, signalling a lower level of demand.

Blue chip oil and gas producers showed little movement today. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) were flat, as was Cairn Energy (LSE: CNE), while another FTSE 100 constituent BG Group (LSE: BG) posted an insignificant loss. Tullow Oil (LSE: TLW) was down 1.6%.

Amec (LSE: AMEC) rose marginally, while fellow oil and gas engineering firm Petrofac (LSE: PFC) posted a small loss.

Midcaps were mixed. Dragon Oil (LSE: DGO) and Heritage Oil (LSE: HOIL) lost 1%, while peers Dana Petroleum (LSE: DNX) and Premier Oil (LSE: PMO) shed less than 1%. Soco International (LSE: SIA) was flat, while JKX Oil & Gas (LSE: JKX) and Salamander Energy (LSE: SMDR) rose marginally and Melrose Resources (LSE: MRS) was down 1.3%.

Services companies were in decline as Wood Group (LSE: WG) lost 2.1%, while peer Wellstream Holdings (LSE: WSM) posted a small loss.

Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) led the small caps, advancing 7.5% after reporting on its full year results. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) followed with a 5% gain.

Europe focused oil and gas developer Ascent Resources (AIM: AST) slipped 7%.

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