"oil is rising due to weakness in the dollar" -
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NEW YORK - Crude oil prices surged further into record terrain Thursday, breaching $83 a barrel as the weak dollar and last week's decline in U.S. oil inventories spurred buying of futures.
Gasoline futures jumped as well.
Oil prices have risen to records in seven straight sessions on the New York Mercantile Exchange on a mix of concerns about falling supplies and tight demand. But many analysts also blame an influx of speculative "nontraditional" capital into energy commodities. And that inflow increases when the dollar falls, analysts say.
Addison Armstrong, an analyst with TFS Energy Futures LLC, wrote in a research note that oil is rising due to weakness in the dollar, which has fallen to a record low against the euro, and is also trading at multi-year lows against other currencies.
A weak dollar supports oil prices by making futures cheaper for foreign investors, noted Antoine Halff, head of energy research at Fimat USA LLC.
"There just seems to be a huge amount of money out there that's moving to the oil in direct correlation with swings in the dollar," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
That also prompts buying by domestic investors, who sense that demand for Nymex oil is rising overseas, Ritterbusch said.
Oil and natural gas markets appeared unimpressed by the prospect that a tropical depression could form soon in the Gulf of Mexico and hit critical gas and oil infrastructure.
Light, sweet crude for October delivery gained $1.25 to $83.18 a barrel on the Nymex, where it had settled at a record $81.93 a barrel on Wednesday. Crude rose as high as $83.42 in intraday trading Thursday.
The October oil contract expires Thursday, and trading in expiring contracts is often volatile as traders move to square positions. Indeed, oil futures gyrated between gains and losses before surging above the $83 a barrel mark.
In London, October Brent crude fell 28 cents to $78.19 a barrel on the ICE futures exchange.
October gasoline jumped 4.26 cents to $2.1360 a gallon on the Nymex.
Heating oil futures rose 0.51 cent to $2.2495 a gallon.
But natural gas fell 12.6 cents to $6.054 per 1,000 cubic feet after the government reported that inventories grew by 63 billion cubic feet last week, slightly below consensus analyst expectations.
Natural gas prices have not been affected by National Hurricane Center forecasts that a tropical depression or storm could soon form in the Gulf.
"Investors seem to be more focused on the big storms that form out in the open Atlantic," Ritterbusch said.
Oil and gas platforms are built to withstand smaller storms _ even of tropical strength, analysts say.
Several oil and gas companies have evacuated nonessential personnel from Gulf installations in recent days as a precaution. But Ritterbusch said such moves are routine this time of year.
"They really don't lose a significant amount of production when they do this," he said.
At the pump, meanwhile, gas prices are still not reacting much to record oil prices. Overnight, the average national price of a gallon of gas rose 0.1 cent to $2.791, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the gasoline futures market, peaked at $3.227 a gallon in late May.
While oil inventories fell last week, supporting prices, refinery activity fell and gasoline inventories grew. Many analysts believe gasoline prices are well past their peak for the year. Despite falling inventories, demand is also falling now that peak summer driving season has ended, analysts say.
Oil's rise in recent sessions has many analysts scratching their heads.
"We believe that global demand is significantly weaker than current record high prices would suggest," Ritterbusch said. "I'm just having an incredibly difficult time coming up with fundamental arguments to support these prices."
But the weak dollar and speculative investors could continue to send oil prices to new records for some time to come, analysts say.
nctimes.com |
