Oil prices rise near US$78 on mixed economic reports, weak U.S. dollar
By THE ASSOCIATED PRESS, cp.org,
Updated: November 25, 2009 8:54 PM
NEW YORK - The U.S. dollar's sway over energy markets was on full display Wednesday, with oil and gasoline futures rising sharply as the U.S. currency tumbled to 15-month lows.
Crude prices had been trading relatively flat, even after the government reported supplies grew by one million barrels last week.
At midday, however, the dollar began to slide against the euro, and crude prices jumped along with gasoline and other crude-based fuels.
Benchmark crude for January delivery rose US$1.94 to settle at $77.96 on the New York Mercantile Exchange.
Natural gas, which each week sets new records for the total amount held in storage, jumped more than eight per cent.
Energy experts were at a loss to explain why natural gas prices rose. Major industrial customers have slashed power usage during the economic downturn.
Orders for big-ticket factory goods fell unexpectedly in October, according to the U.S. Commerce Department, the first decline since August.
Natural gas levels are usually being drawn down at this time of the year as people turn on the heat in their homes.
It's been an extraordinarily mild winter to date almost everywhere, however, and that is helping to push gas storage levels to new heights.
"The last time we saw an injection this late in the year occurred back in 2001," said analyst Stephen Schork.
Also, another one million barrels of crude and an equal amount of gasoline went into storage last week, the government reported. Futures contracts for both rose more than one per cent Wednesday.
Crude's move higher was a demonstration of how much the dollar has come to affect energy prices.
If an investor holds euros or other currencies that strengthen against the dollar, he can get more oil for less because it's bought and sold largely in dollars.
Demand for fuel rose only incrementally while demand for distillate fuels dropped by nearly 10 per cent over the past four weeks compared with the same period last year, according to a weekly government report released Wednesday.
Yet the dollar keeps investors coming back.
On Wednesday, someone holding a euro could trade it in for more than $1.51 to buy crude.
"Loose monetary policy and a weaker dollar should put upward pressure on crude oil prices next year," analysts with Bank of America Merrill Lynch said in a report.
In other Nymex trading, gasoline for December delivery rose 2.33 cents to $1.9623 a gallon. Heating oil gained 2.3 cents to $1.9725 a gallon. Natural gas for December delivery jumped 31 cents to $5.08 per 1,000 cubic feet.
In London, Brent crude for January delivery rose 35 cents to $76.81 on the ICE Futures exchange.
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Associated Press Writers Alex Kennedy in Singapore and Barry Hatton in Lisbon, Portugal, contributed to this report.
