BP, Shell, Cairn Energy, Tullow Oil and BG Group edge lower as oil declinesOctober 12 2010, 2:09pm
Movements in currency markets have not been favourable for crude today as the recovery in the US dollar continued.
The American currency quickly bounced back from last week’s sharp fall that put it at eight month lows against the euro and 15 year lows against the Japanese yen, rising ahead of today’s release of the minutes from the latest policy meeting of the Federal Open Market Committee (FOMC).
The minutes will be scrutinized for signs of whether and how soon the Federal Reserve is planning to implement further quantitative easing (QE).
A stronger greenback makes dollar-denominated currencies such as crude more expensive for holders of other currencies, denting demand.
Equities were in decline today, but the two day fall in oil prices was largely attributed to the strength in the US dollar.
The Organization of Petroleum Exporting Countries (OPEC) today cut its demand forecasts for its crude oil from 28.7 million barrels per day to 28.6 million barrels per day, citing the slowing recovery in the world and particularly the US.
Neither the revision of demand forecasts nor the rising oil prices are likely to have any impact on the cartel’s output quotas, which are expected to be left unchanged at the upcoming meeting.
The OPEC controls about 40% of the total global oil output.
November Brent Crude declined to US$82.90/barrel, while US light, sweet crude for November delivery fell to US$81.38/barrel.
Supermajors BP (LON:BP) and Shell (LON:RDSB) posted small losses, while BG Group (LON:BG) and Tullow Oil (LON:TLW) dipped 1% and 1.5% respectively. Cairn Energy (LON:CNE) declined 2.5%.
Oil and gas engineering firms also were in decline with Petrofac (LON:PFC) dropping 1.7% and Amec (LON:AMEC) posting a small loss.
Most midcaps followed the trend. Soco International (LON:SIA) was at the bottom of the pile, diving 18% after plugging and abandoning an oil well in Vietnam.
Heritage Oil (LON:HOIL) and Premier Oil (LON:PMO) declined 3% and 2.5% respectively.
Salamander Energy (LON:SMDR) lost nearly 2%.
Dragon Oil (LON:DGO) and Dana Petroleum (LON:DNX) declined marginally.
Melrose Resources (LON:MRS) and JKX Oil & Gas (LON:JKX) went against the tide, tacking on 1% and 0.5% respectively.