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Crude Oil Surges to 17-Month High as Dollar Slips Against Euro

Crude oil surged to a 17-month high as the dollar declined against the euro, bolstering the appeal of commodities as an alternative investment.

Oil climbed above $83 a barrel after the greenback fell against the common currency for the third time in four days. Prices slipped from the day’s highs after an Energy Department report showed that supplies of crude oil rose more than forecast last week and that gasoline inventories unexpectedly increased. Futures rebounded after 12 p.m.

“The market is focused on the U.S. dollar today,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “If we were trading on the fundamentals, the crude oil and gasoline numbers would be sending prices lower.”

Crude oil for May delivery rose $1.39, or 1.7 percent, to $83.76 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 9, 2008. Futures are up 5.5 percent this quarter and 69 percent from a year earlier.

Futures touched $83.85, the highest intraday level since reaching $83.95 on Jan. 11. The May contract reached $85.43 a barrel on the same day.

“The target du jour is $83.95, and if we are able to get through there, we will test $85.43,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

The dollar fell 0.7 percent to $1.3510 versus the euro from $1.3414 yesterday.

‘Exogenous Factors’

“There’ve been some bearish headlines today, but the market has been focused on exogenous factors,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “I wouldn’t read too much into today’s trading because you’re getting end-of-the-quarter book squaring.”

There will be no Nymex futures trading on April 2 because of the Good Friday holiday.

Supplies of crude oil rose 2.93 million barrels to 354.2 million in the week ended March 29, the department said today in a weekly report. It was the ninth straight advance, the most since May. Inventories were forecast to climb by 2.5 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.

“These numbers are bearish relative to expectations,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “This is a reminder that there is no physical tightness in crude oil. Supplies are at the highest level since June 12, 2009, which is quite a while back.”

Unexpected Increase

Gasoline stockpiles increased 313,000 barrels to 224.9 million last week, the report showed. A 1.85 million-barrel decrease was forecast.

Gasoline for April delivery rose 3.53 cents, or 1.6 percent, to $2.31 a gallon in New York, the highest settlement since Oct. 1, 2008.

“We’re at a make-or-break point in the market right now,” Schork said. “There’s a real battle of the wills. Either Wall Street will be able to push prices into the upper $80s and then to $90 and $95, or the fundamentals will reassert themselves and prices will drop below $70.”

OPEC’s crude-oil production slipped from a 14-month high in March, led by an Iraqi cut, a Bloomberg News survey of producers, oil companies and industry analysts showed.

Output fell 30,000 barrels a day, or 0.1 percent, to an average 29.205 million barrels a day, according to the survey. Members of the Organization of Petroleum Exporting Countries with production quotas, all except Iraq, raised output by 55,000 barrels to 26.84 million barrels a day, 1.995 million above their target.

Brent crude oil for May settlement increased $1.42, or 1.7 percent, to end the session at $82.70 a barrel on the London- based ICE Futures Europe exchange. It was the highest settlement since Oct. 8, 2008.

President’s Proposal

President Barack Obama said today he will allow oil and natural-gas drilling off the U.S. East Coast and cancel development in Bristol Bay, Alaska. The president proposed permitting exploration in the Atlantic Ocean from Delaware south and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida.

“Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources,” Obama said at an event at Andrews Air Force Base in Maryland.

The expanded exploration will help reduce the nation’s reliance on foreign sources of oil while it begins to transition to new energy sources, the president said.

Long-Term Impact

“The president’s plan may have a long-term impact on supply, but it won’t bring any new barrels to the U.S. shore for at least 10 years,” Brodrick said.

Oil volume on the Nymex was 535,880 contracts as of 3:12 p.m. in electronic trading in New York. Volume totaled 420,070 contracts yesterday, 29 percent lower than the average of the past three months. Open interest was 1.28 million contracts.

The exchange has a one-business-day delay in reporting open interest and full volume data.

Source:
Bloomberg.com