BLBG: Oil Rises to One-Year High as Dollar Drop Spurs Commodity Buys
By Christian Schmollinger and Ben Sharples
Oct. 20 (Bloomberg) -- Oil rose to a one-year high above $80 a barrel in New York as the dollar slipped to a 14-month low against the euro, increasing commodities’ appeal as an alternative investment.
The dollar index, which measures the greenback again six major currencies, fell to its lowest since August 2008. Asian stock markets gained, extending increases in U.S. equities, and raising expectations fuel demand will increase as the global recession ends.
“The dollar seems to be trending in the 75 to 76 range against the basket and I’m looking for further downside on that, so I expect it will underpin oil prices,” said Peter McGuire, a managing director at CWA Global Markets Pty in Sydney in an interview with Bloomberg Television. “Certainly demand is going to increase in the coming years.”
Crude oil for November delivery rose as much as 44 cents, or 0.6 percent, to $80.05 a barrel in electronic trading on the New York Mercantile Exchange, the first time the front-month contract has traded above $80 since Oct. 14, 2008. It was at $79.92 a barrel at 11:51 a.m. Singapore time. Prices settled at $79.61 yesterday, the highest close since Oct. 13, 2008.
The November contract expires today. The more actively traded December contract was at $80.24 a barrel, up 28 cents. Oil is set to close higher for a ninth straight day, the longest streak since July 27.
Oil advanced 1.4 percent yesterday as U.S. stocks climbed on better-than-estimated earnings and speculation the economy is healthy enough for policy makers to unwind efforts to shore up the financial system.
‘Underlying Factors’
“The underlying factors are all still in play,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “A robust economic outlook on the back of a weak dollar is helping to boost the stock market and in turn, both factors are supporting higher oil prices.”
Crude may rise to $89.95 a barrel now that it has breached a key resistance level of $76.28 a barrel, according to technical analysis of Fibonacci retracements by Australia & New Zealand Banking Group Ltd.
Oil prices have gained 25 percent in the past three months as a recovery in equity markets emboldened investors and the sliding U.S. dollar prompted buying of commodities. The dollar traded at $1.4981 per euro, the weakest since August 2008, as of 11:47 a.m. in Tokyo from $1.4965 in New York yesterday.
The MSCI Asia Pacific Index added 0.9 percent to 121.49 as of 12:44 p.m. Tokyo time, set for the highest close since Sept. 8, 2008. The Standard & Poor’s 500 Index rose 0.9 percent yesterday.
Gasoline Supplies
Gasoline inventories probably declined for a second week, falling 1.5 million barrels in the week ended Oct. 16, according to the median of seven estimates by analysts surveyed by Bloomberg News before the Energy Department’s report tomorrow.
Futures climbed last week after a report from the Department showed an unexpected decline in stockpiles of gasoline as refineries idled units. The decrease was the steepest since Hurricanes Gustav and Ike shut refineries representing about a fifth of U.S. capacity in September 2008.
Supplies of distillate fuel, a category that includes heating oil and diesel, declined 1.5 million barrels from 170.7 million, according to the survey. Stockpiles fell 0.6 percent in the week ended Oct. 9 from the highest level since January 1983.
Inventories of crude oil probably rose 1.5 million barrels last week from 337.8 million barrels, the survey showed.
The Energy Department is scheduled to release its weekly report at 10:30 a.m. in Washington.
Brent crude oil for December settlement rose as much as 41 cents, or 0.5 percent, to $78.18 a barrel on the London-based ICE Futures Europe exchange. It was at $78.11 at 11:58 a.m. Singapore time. Yesterday, the contract rose 78 cents, or 1 percent, to $77.77 a barrel.
