(image: cbc.ca and Nicholas Whitaker via heatingoil.com)

The dollar’s gains against the euro paired with expectations that oil inventories would rise to push down oil prices on Tuesday. A strong dollar makes commodities priced in dollars, like crude oil and heating oil, more expensive for traders holding other currencies. The API’s inventory data came out after trading closed yesterday and showed that supplies of crude oil gained a whopping 6.5 million barrels. The EIA report, due out at 10:30 am, is likely to revise that figure considerably, but analysts still expect a build in crude inventories of roughly 2 million barrels. Distillates, which include heating oil and diesel, likely dropped by 1 million barrels, but its effect on oil prices could be subdued since the heating season is drawing to a close.

Today’s average retail heating oil price in the Northeast is 2 cents lower than Tuesday’s average price.

Crude oil prices over the course of today, March 9. (image: ft.com)

Crude and heating oil prices fell today, though each gained back some ground from earlier losses. A strong dollar drove down demand for oil futures, because those commodities became more expensive for traders holding other currencies. Traders expect this week’s inventory reports to show an increase in supplies of crude, and the price of crude and refined products sank as a result. The API’s inventory data will be released later this afternoon, while the EIA’s figures will be issued Wednesday morning at 10:30 am. Inventory numbers are likely to dominate oil markets tomorrow.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Down 0.5 percent, $81.48 per barrel.
Heating oil (April 2010 contract): Down 0.8 percent.

(image: welt.de and life.com)

The price of crude oil closed at an eight-week high on Monday, and heating oil futures on NYMEX perked up as well, but gains in the market were too small to have much impact on retail prices. Expectations of economic improvement—still driven by Friday’s relatively positive jobs report—supported higher oil prices, but price increases were tempered by a stronger dollar. As the value of the dollar rises, commodities price in dollars become more expensive for traders holding other currencies, which lowers demand and puts pressure on prices to fall. The fundamentals of supply and demand still point to lower oil prices, and so far this Tuesday traders have been taking notice; this afternoon’s API report and tomorrow’s EIA report could move prices for crude and heating oil.

Today’s average retail heating oil price in the Northeast is unchanged from Monday’s average price.

Crude oil prices over the course of today, March 3. (image: ft.com)

Crude oil inventories rose by 4.1 million barrels, according to the EIA, far surpassing predictions for a build of 1.4 million barrels, but had no impact on oil prices today. Some analysts pointed to gains on the stock market and the weak dollar to explain rising oil prices. When the stock market moves up, that points to an economic recovery that will boost oil demand, and a weak dollar makes commodities cheaper for investors who hold other currencies. Others pointed to the increase in refinery utilization rates as evidence that any build in crude inventories would be short-lived.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Up 1.5 percent, $80.89 per barrel.
Heating oil (April 2010 contract): Up 1.9 percent.

Crude oil prices over the course of today, March 2. (image: ft.com)

Though there was no news to drive the oil markets, the prices of crude and heating oil nonetheless rose in response to movements in equities, currencies, and other commodities. Gains in the stock market and in metal markets helped drive up oil prices, and fluctuations in the value of the dollar lent support at times; commodities tend to move in inverse relation to the dollar. The API’s inventory report will be issued at 4:30 pm today, followed by the EIA’s report at 10:30 am tomorrow, and those inventory figures will give traders a fresh read on oil fundamentals.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Up 1.3 percent, $79.68 per barrel.
Heating oil (April 2010 contract): Up 1.6 percent.

(image: opb.org and Nicholas Whitaker via heatingoil.com)

On Friday the Commerce Department said that US GDP grew at a rate of 5.9 percent in the fourth quarter of 2009, not 5.7 as was announced in January, and oil traders took the revised number as a sign that the US economy was improving and oil demand would soon follow. Friday’s economic optimism represented a stark shift from Thursday, when an increase in jobless claims caused stock markets and oil prices to fall. Some weakness in the dollar also gave crude and heating oil prices a lift, because a weak dollar makes commodities cheaper for traders who hold other currencies.

Today’s average retail heating oil price in the Northeast is 4 cents higher than Friday’s average price.

In international financial news, last week saw the Euro’s value plummet. In turn, the value of the US dollar climbed, which made crude oil less attractive to foreign traders, helping to push down crude and heating oil prices. The weakening Euro/strengthening dollar trend is expected to continue for at least the duration of this week.

Together, gradually warming weather in the Northeast and a stronger dollar will make for a modest overall decline in heating oil prices this week.

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Crude oil prices over the course of today, February 25. (image: ft.com)

Economic reports raised doubts about the health of the US recovery, as new jobless claims rose again last week and demand for durable goods fell in January. A faltering recovery would keep demand for oil low, and the price of crude and heating oil tumbled today on the disappointing economic news. Despite the difficulties faced by the US economy, the dollar still gained ground on the euro, further pressuring oil prices to fall, since a strong dollar makes dollar-priced commodities more expensive to traders holding other currencies.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Down 2.4 percent, $78.11 per barrel.
Heating oil (March 2010 contract): Down 2.8 percent.

Federal Reserve Chair Ben Bernanke at a House Committee hearing yesterday. (image: Saul Loeb via Getty Images)

Testimony by Federal Reserve chairman Ben Bernanke overcame concerns about oil demand and pushed oil prices higher on Wednesday. Bernanke said the Fed would not raise interest rates anytime soon, which should keep the dollar low. A weak dollar makes commodities cheaper for traders who hold other currencies, increasing demand and prices. Other news yesterday put some downward pressure on crude and heating oil prices. The strike at Total’s refineries in France ended, removing concerns about fuel shortages. The EIA’s inventory report showed a build in crude supplies and a smaller-than-expected decline in distillate inventories, which include heating oil and diesel. Weak demand for heating oil could be exerting more influence as the heating season winds down; heating oil futures, which usually move in tandem with crude oil futures, rose by a much smaller percentage on than crude did on Wednesday.

Today’s average retail heating oil price in the Northeast is 1 cent higher than Wednesday’s average price.

Crude oil prices over the course of today, February 24. (image: ft.com)

The EIA inventory numbers showed a build in crude supplies and a smaller-than-expected drop in distillates, which include heating oil and diesel, but weak demand was overcome by the effect of Federal Reserve chairman Ben Bernanke’s testimony before Congress. Bernanke said the Fed’s benchmark interest rate would stay low “for an extended period,” which pushed the value of the dollar lower. The weak dollar supported higher oil prices, since it makes dollar-priced commodities cheaper. Crude’s gains were larger than those in the heating oil market, where substantial inventories may be weighing on prices as the heating season nears its close.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Up 1.2 percent, $79.81 per barrel.
Heating oil (March 2010 contract): Up 0.3 percent.