BLBG: Oil Rises a Second Day as Weak Dollar Boosts Investment Appeal
By Yee Kai Pin
Oct. 6 (Bloomberg) -- Crude oil rose for a second day in New York as the dollar’s decline bolstered the appeal of commodities as a hedge against inflation.
Oil pared gains as the dollar regained some ground against the euro after Saudi Arabia’s central bank Governor Muhammad al- Jasser denied a report that Gulf states may switch to a basket of currencies for transactions. Prices had climbed yesterday as U.S. stocks recovered after data showed service industries in the country, the world’s biggest energy consumer, returned to growth following 11 months of contraction.
“We’re seeing a very strong oil market today not necessarily based on any changes in fundamentals but more on external macro factors,” said Yingxi Yu, a commodities analyst at Barclays Capital in Singapore. The dollar’s weakness is “ an important driver of oil, although fundamentals do play a bigger role over the medium term.”
Crude oil for November delivery rose as much as 74 cents, or 1.1 percent, to $71.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $70.80 a barrel at 3 p.m. Singapore time. Prices have gained 59 percent this year.
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, rose to 50.9, higher than forecast, from 48.4 in August, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction.
“People are still on the backfoot wanting to buy and consume,” Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said in a Bloomberg Television interview. “The positive data we had out of the U.S. last night with the ISM non-manufacturing was another step to say that any dip really should be looked at.”
Asian Shares
Asian stocks rose for the first time in four days. The MSCI Asia Pacific Index added 1 percent to 114.89 as of 1:42 p.m. in Tokyo. Yesterday, the Standard & Poor’s 500 Index added 1.5 percent to 1,040.46 in New York, its steepest gain in a week. The Dow Jones Industrial Average advanced 112.08, or 1.2 percent, to 9,599.75. European stock-index futures were higher.
“We’re seeing some tentative signs that consumption is picking back up,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “It continues to look like the recovery is on track.”
The dollar fell to $1.4722 per euro at 2:56 p.m. in Tokyo, from $1.4648 yesterday in New York, after the U.K.-based Independent newspaper reported Arab states are seeking to move to a basket of currencies, including the yen, the yuan, the euro and gold to settle oil transactions. Commodities including gold and copper advanced.
“It’s becoming more self-fulfilling in the sense that people trading oil tend to look at the dollar much more than before,” said Yu at Barclays Capital. “Definitely there’s an impact on oil especially if there’s a big move.”
Oil Inventories
U.S. crude oil inventories probably rose last week as refineries performed seasonal maintenance, a Bloomberg News survey showed. Commercially held stockpiles increased 2 million barrels from 338.4 million in the week ended Oct. 2, according to the median of estimates from 11 analysts.
Distillate fuel inventories, which include heating oil and diesel, are expected to have declined 400,000 barrels, the survey showed. Stockpiles previous rose a sixth week to 171.1 million barrels, the highest since 1983.
The Energy Department is scheduled to release its Weekly Petroleum Status Report at 10:30 a.m. tomorrow in Washington. The industry-funded American Petroleum Institute will put out its own data today.
Brent crude oil for November settlement rose as much as 63 cents, or 0.9 percent, to $68.67 a barrel on the London-based ICE Futures Europe exchange. It traded at $68.40 a barrel at 3:01 p.m. Singapore time. Yesterday, the contract slipped 3 cents to settle at $68.04 a barrel.
