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Crude Oil flat as dollar strengthens amid European uncertainty

Crude oil pulled back somewhat this afternoon after an initially strong start to the day. This morning the ‘black gold’ pushed ahead and was largely supported by fairly buoyant commodity markets. Copper was the key driver, as the earthquake in Chile is estimated to have interrupted up to 5% of the world’s copper production.

The Globex light sweet crude oil April future was up marginally, rising by less than $0.10c per barrel. However a number of concerns in Europe have offset potential gains as investors await more clarity in terms of the political outlook in the UK, and the more pressing issue of Greek public finances. Subsequently the Dollar has enjoyed a fairly positive trading session against the Euro and Sterling.

The British pound has been particularly weak against both the Euro and the US Dollar today, as pollsters emphasised the potential for a hung-parliament. According to reports, the latest data suggests an increasing possibility that neither political party will win a controlling majority the upcoming general election.  The political uncertainty raises a question mark over both the forex and commodity markets.

The health of the Eurozone also remains a talking point in the commodities market, as fears over the Greek debt crisis linger. In the latest development the Euro has been sliding to nine-month lows against the Dollar.  Delegates from both European Union and the European Central Bank (ECB) arrived in Athens today for meetings with the Greek finance minister, George Papaconstantinou. In a statement which followed the meeting Olli Rehn, the EU’s Monetary Affairs Commissioner, said that Greece must do more to reduce its deficit.

The meetings precede the publication of the Greek government’s new austerity programme, which is expected later this week.

Aside from the consumption influence on the oil market, a stronger dollar typically causes commodities to be less attractive. The vast majority of trading venues denote commodity prices in US Dollars, consequently the stronger relative currency value diminishes the underlying investment value of the physical commodity for investors outside the United States.

On the London Stock Exchange oil and gas stocks have been fairly positive and have held onto earlier gains. FTSE100 constituents BP (LSE: BP.) and Cairn Energy both added around 3% to Friday’s close,  while Royal Dutch Shell (LSE: RDSB) was also trading notably higher, rising over 2.5%. Irish-headquartered Tullow Oil (LSE: TLW) and BG Group (LSE: BG) rose both marginally.

FTSE100 oil service group Petrofac (LSE: PFC) also had a particularly strong day as it advanced nearly 3.5% to trade at 1,063p per share.

In the FTSE250, Premier Oil (LSE: PMO) climbed nearly 3% to trade at 1,129p, while Heritage Oil (LSE: HOIL), JKX Oil & Gas (LSE: JKX) and Soco International (LSE: SIA) all gained around 2.5%. Afren (LSE: AFR) was one of the few oil and gas producers in the red today, they dropped more than 1%.

On the AIM market trading was somewhat mixed, among the notable risers emerging oil producer Petroceltic International (AIM: PCI) advanced over 4%. However many of the oil and gas juniors were generally flat on the day.

Disclosure: The author holds no positions