MW: Crude rebounds from one-month low as dollar weakens
NEW YORK (MarketWatch) -- Crude-oil futures rose more than 3% Monday, rebounding from their lowest level in one month as upbeat global economic reports and the decline in the value of the dollar drew in investors.
In the U.S., retail sales rose more than expected last month, and data also showed manufacturing activity in New York expanded in November, although at a slower pace than October.
In Japan, gross domestic product rose at a better-than-expected pace in the third quarter. Japan ranks No. 3 among the world's largest oil consumers, after the U.S. and China.
Crude for December delivery gained $2.71, or 3.6%, to $79.06 a barrel on the New York Mercantile Exchange. It ended at $76.35 a barrel on Friday, the lowest settlement for a front-month contract since Oct. 14.
The weaker dollar "is providing much of the boost for the energy complex," said Brian Niemiec, analyst at Susquehanna Financial Group. "Strong economic data out of Japan are also helping crude oil move higher."
In currencies, the dollar slipped under a combination of pressure from stepped-up rhetoric from China, better-than-expected Japanese growth data and rising gold futures.
The dollar index (DXY 74.92, -0.23, -0.31%) , which tracks the performance of the greenback against a basket of other major currencies, fell 0.6% to 74.881 in recent trading. The benchmark has lost about 16% since early March. See Currencies.
With oil denominated in dollars, a weaker dollar makes it less expensive for investors holding other currencies.
"Again, prices are following changes in the exchange rate," said Christophe Barret, global oil analyst at Calyon. Fundamentals in the energy market don't bear out the gains to start the week, Barret said.
"In the oil market itself there is little bullish news," he told clients. "Now we are getting only weak statistics on the oil front."
However, "it's physical market. It cannot stay out of balance for very, very long."
Also helping set the trading tone, Japan's GDP rose 1.2% in the quarter from the April-through-June period, or 4.8% on an annualized basis. Economists polled by Dow Jones Newswires had expected a 0.6% quarter-on-quarter increase and annualized growth of 2.2% in the latest period. See full story on Japan GDP.
Rounding out the recent action in energy, December gasoline rose 3.5% to $1.9839 a gallon and December heating oil added 3.9% to $2.0433 a gallon.
December natural gas also showed a sizable gain, rallying 5% to $4.612 per million British thermal units.
Elsewhere in the commodity markets, the December gold contract surged to a fresh high near $1,130 an ounce, buoyed by dollar weakness. See Metals Stocks.
