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Crude Oil Eases After Approaching $80 Overnight

19th Oct 2009, 12:42 pm Crude Oil Eases After Approaching $80 Overnight

The oil price has eased slightly through the morning. The latest push in the rally was spurred by a weaker Dollar. Additionally the optimism in equities appears to have spilled over into the Oil market with investors backing the ‘black gold’ after weeks of consolidation.

The eighth consecutive daily gain saw the crude oil price approach $80 dollars a barrel in Asia overnight. Since peaking at $79.40, WTI Crude futures on London’s Intercontinental Exchange (ICE) have fallen back somewhat losing half a percent trading at $78.50.

In last week’s trading, improving fundamentals, buoyant equity markets and the weaker US Dollar combined to support a crude oil rally which finally broke out of its recent trading range.

At the end of last week the US Department of Energy’s inventory report spurred on crude to break the $78 and record a yearly high. Gasoline stocks fell by 5.2m barrels, fairly broad analyst expectations were substantially less optimistic, ranging between a 700,000 barrel decline and a 1m increase.

With a rise of 400,000 barrels, Crude stockpiles also represented substantially better- than-expected inventories. Analysts had anticipated an increase of 2 million barrels.

In recent weeks fears of an increasingly large US oil and gasoline surplus has capped the oil market and the wider ‘energy complex’, meanwhile the rest of the commodity market has become stronger thanks to the decline of the US Dollar. With this most recent news, investors will look to the demand picture as they evaluate the oil price which is currently standing at a new high for 2009.

The American company reporting season will remain in focus for oil investors this week. The country's retailers and consumer stocks take their turn in the spotlight. Last week Wall Street’s major financial companies boosted many analysts' recovery outlook.

On the London Stock Exchange, all major oil and gas stocks were on the rise in early trade. Petrofac (LSE: PFC) and Tullow Oil (LSE: TLW) were in the lead with gains of over 2%. Shell (LSE: RDSB) added 2%, while fellow supermajor BP (LSE: BP) rose 1.3%, as did another FTSE 100 constituent, BG Group (LSE: BG). Cairn Energy (LSE: CNE) added 1.5%.

Dana Petroleum (LSE: DNX) led the mid caps with a 1.5% climb after acquiring a 23% interest in Hyperdynamics Corp's concession offshore the Republic of Guinea in West Africa. Dragon Oil (LSE: DGO) opened with marginal gains, while Heritage Oil (LSE: HOIL) was at the bottom of the pile, with a 1.5% loss.

Matra Petroleum (AIM: MTA), Sound Oil (AIM: SOU) and Nostra Terra (AIM: NTOG) all recorded strong ‘double-digit’ gains this morning. Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (AIM: GOO) went in the opposite direction, falling 5%. North American based explorer Nighthawk Energy (AIM: HAWK) added 3.3%.

Ascent Resources (AIM: AST), Northern Petroleum (AIM: NOP) and Pantheon Resources (AIM: PANR) were also fairly strong, rising between two and three percent.

Africa focused energy company Dominion Petroleum (AIM: DPL) and US focused junior Empyrean Energy (AIM: EME) were among the leading fallers in the sector, shedding 5% and 4.5% respectively.

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