Oil plunges on stronger dollar, more supply

11:22, May 04, 2011      

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Crude prices plunged on Tuesday as the dollar strengthened, investors expected U.S. crude inventories rose last week and the India's interest hike hurt the demand expectation.

The dollar rose against the euro on Tuesday. And the dollar index, which tracks the dollar performance against a basket of currencies, rose more than 0.2 percent. Stronger greenback made dollar-priced oil less attractive.

The U.S. Energy Information Administration is scheduled to release weekly crude inventory data on Wednesday. Markets were expecting a rise in the U.S. crude stocks. And gasoline inventories were also expected to see rising last week after 10- straight week of declines, as the demand started to slow down amid rising prices.

The Indian central bank raised its lending interest rate by 50 basis points in an attempt to tackle inflation. This more-than- expected interest hike caused concerns among the investors that the oil demand in the large country could decline.

The markets were still assessing the impact of al-Qaida leader Osama bin Laden's death. There were speculations that terrorists may attack oil fields, which could push oil prices higher.

Light, sweet crude for June delivery dropped 2.47 dollars, or 2. 22 percent to settle at 111.05 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude for June delivery also fell sharply and last traded around 122 dollars a barrel.

Source: Xinhua
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