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Crude falls sharply amid stronger dollar boosted by CPI data

Published 05/22/2015, 02:54 PM
Updated 05/22/2015, 02:59 PM
WTI crude fell below $60 a barrel, while brent dipped under $66 on Friday

Investing.com -- Crude futures fell sharply on Friday paring some of its gains from one session earlier, amid a strengthening dollar aided by slight increases in inflation last month.

On the New York Mercantile Exchange, WTI crude for July delivery plunged 1.06 or 1.75% to 59.66 a barrel. Previously, Long Sweet Texas crude surged more than 4.7% over the prior two sessions amid easing concerns of oversupply. For the week, WTI crude futures fell by more than 1.5% after opening on Monday above $60 a barrel.

Earlier on Friday, crude future plummeted 0.80 to a near session-low of 59.42 in U.S. morning trading after the U.S. Bureau of Labor Statistics released its Consumer Price Index for the month of April. While the headline CPI index rose only 0.1% from March, the reading of the Core CPI index was less benign. Core CPI, which excludes food and energy prices, increased by 0.3% for the month, its highest gain since January, 2013, and 1.8% on a year-over-year basis. The Federal Reserve would like to see inflation move toward its targeted goal of 2% on an annual basis before it institutes its first interest rate hike in nearly a decade.

As a result, the dollar spiked by more than 1%, reaching its highest level in more than three weeks. The dollar also appreciated sharply against the euro, as EUR/USD fell to an intraday low of 1.1003 – its lowest level since April 29. Crude futures tend to move lower when the euro depreciates against the dollar.

On the Intercontinental Exchange (ICE), brent crude for July delivery fell 1.21 or 1.82% to 65.33 a barrel. For the week, brent futures dipped by more than 2% after opening on Monday near $67 a barrel. Meanwhile, the spread between the international and U.S. domestic benchmarks of crude fell to 5.67, down from Thursday's level of 5.85.

Oil services firm Baker Hughes (NYSE:BHI) said in its weekly U.S. rig count report that oil rigs nationwide fell by one last week to 659, the lowest weekly level since Aug, 2010. While the nationwide rig count has declined for 24 consecutive weeks, the pace of slowdown has dropped considerably since earlier in the year. Last fall, the rig count peaked above 1,600. A falling rig count has eased concerns of oversupply in the U.S. market.

On Wednesday, the Energy Information Administration (EIA) said crude stockpiles nationwide decreased for the third consecutive week amid slower output and increased refinery demand. Last week, U.S. crude output dropped to 9.262 million barrels per day from 9.374 million a week earlier, as production slowed in Alaska. Crude futures were relatively unchanged following the release of the report.

Federal Reserve chair Janet Yellen's address in Rhode Island on the outlook of the U.S. economy also had little impact on crude prices. In a speech to the Greater Providence Chamber of Commerce, Yellen said she thinks an interest rate hike by the Fed will be appropriate at some point this year if there is enough improvement in the U.S. economy.

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