Bloomberg Oil Falls the Most in Seven Weeks as Dollar Gains, Stocks Drop

April 20 (Bloomberg) -- Oil fell the most in seven weeks as a stronger dollar reduced the appeal of commodities and on speculation supplies will rise as the recession reduces demand.

Oil dropped as the dollar rose to a one-month high versus the euro, making crude less attractive as a currency and inflation hedge. Futures were also pulled lower by falling U.S. equities. An Energy Department report this week is forecast to show that crude inventories climbed from the highest level since September 1990.

“The strength of the dollar has prompted a selling in the oil market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We repeatedly shift from concentrating on the fundamentals of high inventories and low demand on one hand and hopes of recovery later this year. The fundamental picture has reasserted itself today.”

Crude oil for May delivery fell $4.45, or 8.8 percent, to $45.88 a barrel at 2:48 p.m. on the New York Mercantile Exchange, the lowest settlement since March 11. It was the biggest drop since March 2. Prices are up 2.9 percent this year.

The May contract expires tomorrow. The more-active June futures dropped $3.96, or 7.5 percent, to $48.51 a barrel.

The dollar strengthened as European Central Bank policy makers disagreed on the measures needed to combat the recession. The U.S. currency rose to $1.2922 from $1.3044 in New York on April 17.

Stocks declined on concern that credit losses are growing. The Standard & Poor’s 500 Index dropped 4.3 percent to 832.39. The Dow Jones Industrial Average fell 289.60 points to 7,841.73.

Trading Range

“The strong dollar and weak stock market are key,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “Oil is still locked in a trading range and I doubt that today’s headlines will be enough to break out of it.”

Oil prices around $50 a barrel will help the economy recover, according to Mohamed al-Hamli, the oil minister of the United Arab Emirates. The Organization of Petroleum Exporting Countries is concerned about oil demand uncertainty and maintaining crude prices at reasonable levels is vital, he said.

Crude-oil stockpiles rose 2.4 million barrels last week, according to the median of 10 estimates by analysts in Bloomberg News survey. The Energy Department is scheduled to release its weekly report April 22 at 10:30 a.m. in Washington. more...