Oil Trades Little Changed After Declining on Stronger Dollar

Dec. 22 (Bloomberg) -- Crude oil was little changed in New York after declining amid a stronger dollar, reducing demand for commodities as an alternative investment.

Oil fell 1.2 percent yesterday after the U.S. currency rebounded. Futures had risen earlier as Nigeria’s main militant group claimed its first assault on oil infrastructure in the country in five months, and Iraq shut an export pipeline to Turkey after an explosion. Iranian troops withdrew from a disputed Iraqi oil well on Dec. 19, Iraqi officials said.

“It continues to be a dollar story,” Mark Pervan, senior commodity strategist with ANZ Banking Group Ltd. in Melbourne, said by phone today. “We’ve seen a bit of washing out of the risk premium from last week’s Iran-Iraq news. Clearly the market is a little concerned about supply conditions.”

Crude oil for February delivery traded at $73.67, down 5 cents, in electronic trading on the New York Mercantile Exchange at 8:48 a.m. Singapore time. January futures, which expired at the close of floor trading yesterday, had dropped 89 cents to $72.47 a barrel. Prices are up about 65 percent this year.

“The market is looking to the dollar and the stock market for direction,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Oil is moving on what’s happening in the financial markets, not because of anything to do with the fundamentals.”

The U.S. currency changed hands at $1.4275 per euro in early trading after appreciating 0.4 percent yesterday. The dollar may gain further on speculation the Federal Reserve is preparing to withdraw the stimulus it offered.

‘Worrisome Headlines’

“Traders are balancing the worrisome headlines from Nigeria and Iraq against the ample stockpiles and spare capacity that is on hand,” said Phil Flynn, vice president of research at PFGBest in Chicago.

The Movement for the Emancipation of the Niger Delta, or MEND, said Dec. 19 it attacked a pipeline in the southern oil region used by Royal Dutch Shell Plc and Chevron Corp.

The “warning strike” at Abonemma in Nigeria’s southern oil region was to protest the lack of progress in talks with the government since President Umaru Yar’Adua was hospitalized in November, Jomo Gbomo, a spokesman for MEND, said in an e-mailed statement over the weekend.

Nigeria’s oil minister said Shell will need government approval to sell oilfields following a report that it plans to sell as much as $5 billion of assets in the nation.

Pipeline Shutdown

In Iraq, the pipeline supplying the Ceyhan oil export terminal was sabotaged around 8:30 p.m. local time Dec. 19, Asim Jihad, an Oil Ministry spokesman, said over the weekend.

The Iranian forces left the al-Fakah well late Dec. 19, Iraq’s deputy minister of oil, Abdul Kareem al-Luaibi, told reporters in Baghdad over the weekend.

“We got a boost earlier on the Nigeria news but then the market faded,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “Unless something untoward happens, I doubt we will see much activity through the end of the year.”

Some traders are taking off during the last two weeks of the year because of winter holidays. There will be no trading on Dec. 25 for Christmas and on Jan. 1 for New Year’s Day.

OPEC Meeting

The Organization of Petroleum Exporting Countries has a consensus on “no change” in oil production quotas for the group’s meeting, Secretary-General Abdalla el-Badri said.

“At the moment we are comfortable with prices,” OPEC President and Angolan Oil Minister Jose Maria Botelho de Vasconcelos said in an interview with state radio. “Everything indicates that we will maintain the present situation,” when OPEC ministers meet.

Members from countries including Kuwait and Libya have already signaled no need to change quotas in comments this month. All 36 analysts in a survey by Bloomberg last week said they expected OPEC to maintain its formal production limit at the Angola meeting tomorrow.

Brent crude oil for February settlement declined 76 cents, or 1 percent, to end the session at $72.99 a barrel on the London-based ICE Futures Europe exchange yesterday.