Crude Oil Trades Near $83 After Rising on Dollar Slide, Demand
By Gavin Evans and Christian Schmollinger
Sept. 28 (Bloomberg) -- Crude oil traded near $83 a barrel in New York after
rising the most in four months yesterday as the sliding U.S. dollar drew
investors to commodities as alternative investments.
Oil rose more than $2 a barrel yesterday after the dollar fell to a sixth
straight record low against the euro. Investors pushed oil to a record last
week on concern hurricanes may cut production in the Gulf of Mexico and hamper
efforts to prepare fuel stockpiles for peak winter demand.
``There are investors moving into physical assets to try and protect
themselves against the weakening dollar,'' said Tom Hartmann, commodity broker
at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``Heating oil
supplies may start to become a concern, especially with the low utilization
rates'' reported by refiners last week, he said.
Crude oil for November delivery was at $83.17 a barrel, up 29 cents, in
after-hours electronic trading on the New York Mercantile Exchange at 9:35 a.m.
in Singapore.
The contract rose $2.58, or 3.2 percent, to $82.88 yesterday, the biggest
one-day gain since May 17, and the second- highest close ever. The October
contract touched $83.90 on Sept. 20, the highest since futures were introduced
in 1983.
Gold and silver rose and platinum jumped to a record yesterday because of the
falling dollar. The currency has tumbled since the Federal Reserve lowered the
overnight lending rate between banks 0.5 percentage point to 4.75 percent on
Sept. 18, the first reduction in four years.
Weak Dollar
``When you have a central bank that's willing to do whatever it takes to
avoid a recession, owning oil makes a lot of sense,'' Bill O'Grady, director of
fundamental futures research at A.G. Edwards & Sons in St. Louis, said
yesterday. ``It's become clear that the Fed is willing to tolerate a weak
dollar.''
In London, Brent crude oil for November settlement was at $80.33 a barrel, up
30 cents in electronic trading on the ICE Futures Europe exchange. It rose
yesterday $2.60, or 3.4 percent, to settle at $80.03, the highest close since
the contract was introduced in 1989.
A lower dollar makes oil cheaper in the countries using other currencies. In
the past, members of the Organization of Petroleum Exporting Countries have
said a falling dollar justified higher prices because a weaker dollar reduces
the spending power of oil receipts.
In U.S. dollars, West Texas Intermediate, the New York- traded crude-oil
benchmark, is up 36 percent so far this year. Oil is up 27 percent in euros, 32
percent in British pounds and 32 percent in yen.
Stockpiles, Cushing
Oil gained the past two days, even after a report showing U.S. crude oil
stockpiles unexpectedly rose for the first time in five weeks. Inventories
increased as imports jumped and refining rates slowed to a six-month low.
Inventories at Cushing, where WTI is stored, dropped 209,000 barrels to 18.13
million last week, the Energy Department reported Sept. 26. It was the 16th
decline in 18 weeks, and left Cushing supplies at the lowest since the week
ended Dec. 2, 2005.
``The funds decided the big drop at Cushing outweighed the gains elsewhere,''
Addison Armstrong, director of market research at TFS Energy LLC in Stamford,
Connecticut, said yesterday.
U.S. inventories nationwide rose 1.84 million barrels last week to 320.6
million barrels, 8.5 percent more than the five- year average for the period.
Supplies of distillates, including heating oil and diesel, rose 1.53 million
barrels, the report showed. Gasoline supplies increased 532,000 barrels.
Correction Risk
The risk of storms in the Gulf of Mexico, source of a quarter of U.S. oil
output, has helped sustain prices. September is the busiest month of the
Atlantic hurricane season and activity usually drops sharply through October
and November.
While the season has been active, none of the weather systems being monitored
now present much of a risk, Altavest's Hartmann said.
``My gut feel is that there isn't much weather premium left'' in oil prices,
he said. ``I don't know what it will take to pull this market back other than
exhaustion itself.''
To contact the reporters on this story: Gavin Evans in Wellington at [EMAIL
PROTECTED] ; Christian Schmollinger in Singapore at [EMAIL PROTECTED]
Last Updated: September 27, 2007 21:39 EDT
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