Oil slips from 18-month high

| Wednesday April 7, 2010 00:00

The US services sector grew at its swiftest in nearly four years in March and future home sales rose unexpectedly in February, statistics showed on Monday, bolstering hopes for a sustainable economic recovery and job growth.

US crude for May delivery slid 24 cents to $86,38 by 0505 GMT, off Monday's high of $86,90 a barrel, the highest intraday figure struck since October 2008. ICE Brent declined 28 cents to $85,60 yesterday.

US crude inventories probably gained for a 10th consecutive week last week, a Reuters survey showed.'I don't think that the fundamentals necessarily justify such a high price, but the underlying tone in the market remains very positive,' said David Moore, Commodity Strategist at the Commonwealth Bank of Australia in Sydney.

'One big factor is that the US dollar is stronger in trading today and that has been an important influence on the oil price,' Moore said, referring to the inverse correlation between the currency and crude.

The dollar gained nearly 0,4 percent against a basket of currencies on yesterday. A stronger greenback renders imports of dollar-denominated commodities more expensive for buyers other than the US.

Oil prices rose more than 8 percent in the five sessions to Monday, their sharpest 5-day winning streak this year. There was no trading on the New York Mercantile Exchange on April 2 because of Good Friday.

'It simply rose so quickly in trade affected by the Easter holidays that I suspect we are just seeing some correction from the very strong run-up in recent days,' Moore said.

Attention in the oil market was set to shift to US inventory statistics due out later yesterday and on Wednesday.

Crude stockpiles were forecast to have risen 1,7-million barrels, the Reuters poll showed, while a 1,4-million drawdown was expected in both gasoline supplies and distillate stocks, comprising heating oil and diesel(today).

The American Petroleum Institute will release its industry report on Tuesday,  (yesterday) at 4:30 p.m. EDT (2030 GMT), followed by government figures from the US Energy Information Administration on Wednesday at 10:30 a.m. EDT.

'I think prices ultimately may return to the high 70s and low 80s over the course of this year,' Moore said. 'But for now, the ability for it to spike further is there.' (Reuters)