BLBG: Oil Rises to 5-Week High as Dollar’s Drop Bolsters Commodities
Crude oil rose to a five-week high as the U.S. dollar weakened against the euro, bolstering the appeal of commodities as an alternative investment.
Oil climbed 4.4 percent and the dollar weakened versus the euro after unemployment advanced to the highest in 25 years in the U.S., the world’s biggest energy user. The Organization of Petroleum Exporting Countries will consider a fourth production cut when ministers meet on March 15.
“Oil is up because the unemployment number is causing the dollar pain,” said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. “This rally probably won’t last for long. As bad as things are here, I imagine the data from Europe and elsewhere will be worse, which will strengthen the dollar.”
Crude oil for April delivery rose $1.91 to $45.52 a barrel at 2:57 p.m. on the New York Mercantile Exchange, the highest settlement since Jan. 26. Prices climbed 1.7 percent this week and are up 2.1 percent so far this year.
Gasoline futures for April delivery increased 1.95 cents, or 1.5 percent, to end the session at $1.3322 a gallon in New York. Heating oil for April delivery climbed 6.96 cents, or 6 percent, to settle at $1.2294, the biggest gain since Jan. 23.
U.S. payrolls fell by 651,000 and revisions for the prior two months lopped off an additional 161,000 jobs, the Labor Department said today in Washington. The jobless rate climbed to 8.1 percent, the highest since December 1983. Economists surveyed by Bloomberg News projected an increase to 7.9 percent.
The dollar declined 0.8 percent to $1.2635 per euro from $1.254 yesterday. It reached $1.2754, the lowest level since Feb. 27.
Brent Discount
Crude oil in New York traded at a premium to London’s Brent grade today for the first time since Dec. 11 as stockpiles declined in Cushing, Oklahoma, where West Texas Intermediate oil, the U.S. benchmark, is delivered. WTI traded at an average premium of $1.25 a barrel since Jan. 1, 2000.
Inventories at Cushing have dropped 2.8 percent to 34 million barrels in the past three weeks, according to an Energy Department report on March 4. Supplies in the week ended Feb. 6 were the highest since at least April 2004, when the department began keeping records.
“Crude is in a firm downtrend,” said Zachary Oxman, a senior trader at Wisdom Financial Inc. in Newport Beach, California. “They’ve got a ton of supply and they’re having trouble storing it.”
Brent crude oil for April settlement rose $1.21, or 2.8 percent, to end the session at $44.85 a barrel on London’s ICE Futures Europe exchange.
“A lot of what we are seeing is a return to normality,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “WTI needs to trade at a premium to Brent to attract the imports that we need.”
OPEC Shipments
OPEC will reduce crude-oil shipments by 1.9 percent in the month ending March 21, according to Oil Movements. Members will load 22.67 million barrels a day in the period, down from 23.1 million a day in the month ended Feb. 21, the Halifax, England- based tanker tracker said in a report yesterday.
The 12-member group cut output by 2.7 percent to an average 27.78 million barrels a day in February, according to a Bloomberg News survey of oil companies, producers and analysts.
OPEC agreed on Dec. 17 on output constraints that would reduce supplies in January by 2.2 million barrels a day from December levels. That followed pledges to remove 2 million barrels a day in the fourth quarter of last year.
Wrong Signal
“There’s no need to announce another cut right now,” Francisco Blanch, Merrill Lynch & Co. head of global commodity research, said in a telephone interview from London today. “Supply is not as abundant, the crude overhang we’ve seen is starting to fade. It would send the wrong political signal.”
If OPEC does decide to reduce production targets this month, prices may rise to $60 a barrel, according to BlueGold Capital Management LLP, the London hedge fund that returned 31 percent this year on energy trades.
OPEC Secretary-General Abdalla el-Badri said today in a statement that calls for oil to remain at $40 a barrel are “short-sighted” because such prices endanger future investment.
The number of oil and natural gas rigs operating around the world fell 7.4 percent in February to the lowest level since April 2006, according to data published by Baker Hughes Inc. Rigs exploring for or producing oil or gas declined by 221 to 2,753, Baker Hughes said today on its Web site.
Oil may rise further next week. Twenty of 40 analysts surveyed by Bloomberg News, or 50 percent, said futures will increase through March 13. Eleven respondents, or 28 percent, forecast prices will be little changed and nine said that there will be a decline.
Crude oil volume in electronic trading on the exchange was 499,316 contracts as of 3:17 p.m. in New York. Volume totaled 496,893 contracts yesterday, 8.3 percent lower than the average over the past three months. Open interest was 1.21 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.
