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Crude falls below $79 ahead of EIA inventories data

Crude prices fell today as the US dollar strengthened amid losses in global equity markets, which were pushed down by Fed Chairman Ben Bernanke’s gloomy assessment of the US economy in his speech to the Congress yesterday and today’s negative economic data.

Markets in Europe and stock index futures in the US were in a freefall after today’s jobless claims update from the Labor Department revealed an unexpected increase of 22,000 to 496,000, while a decline was projected by most surveys.

The stock market declines increased the appeal of the greenback as a safe investment to drive up its value. A stronger US dollar makes dollar-denominated commodities such as crude more expensive for holders of other currencies, pushing down the demand.

Further direction for crude prices will be set by today’s inventories update from the Energy Information Administration (NYSEMKT:EIA). Yesterday’s data from API (American petroleum Institute) revealed that stockpiles fell by 3.1 million barrels last week instead of an expected increase. However, gasoline stocks added 1.7 million barrels, while distillate stocks including heating oil were down by 834,000 barrels, which was a lesser decline than projected.

April Brent Crude was down to US$76.75/barrel, while US light, sweet crude slipped to US$78.70/barrel after recapturing the US$80/barrel mark yesterday.

Blue chip oil and gas producers turned negative today. Tullow Oil (LSE: TLW) was at the bottom of the pile with a 2% loss. Cairn Energy (LSE: CNE) was down 1.7%, while BG Group (LSE: BG) declined 1.5%. Shell (LSE: RDSB) was down 1.2%, while fellow supermajor BP (LSE: BP) declined marginally.

Petrofac (LSE: PFC) moved with the sector, shedding 1.9%, while fellow oil and gas engineering firm Amec (LSE: AMEC) posted a small loss.

Midcaps followed the trend. JKX Oil & Gas (LSE: JKX) was the heaviest faller with a loss of nearly 4%. Salamander Energy (LSE: SMDR) was down 3.6%, while Premier Oil (LSE: PMO) slid 2% and Melrose Resources (LSE: MRS) and Soco International (LSE: SIA) dropped 1.5%. Dana Petroleum (LSE: DNX) and Dragon Oil (LSE: DGO) lost 1% and Heritage Oil (LSE: HOIL) declined marginally.

Services companies also were in selling mode as Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) retreated 2.2% and 1% respectively.

Junior companies didn’t show much movement today. Energy investor Xtract Energy PLC (AIM: XTR) moved along with the sector, shedding 6%.

Disclosure: The author holds no positions in the company