SFC: Oil Rises Above $82 as Dollar Slips, Supplies Probably Dropped
Aug. 3 (Bloomberg) -- Crude oil rose above $82 a barrel as the dollar declined against the euro and on speculation that U.S. inventories fell for the first time in three weeks.
Oil climbed as much as 1.5 percent after the euro advanced to the highest level against the U.S. currency since May 3, making commodities more attractive as an alternative investment. A government report tomorrow may show oil supplies dropped 0.5 percent, a Bloomberg News survey showed.
"Investors are bidding up commodities because of the cheap dollar," said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. "You don't have the fundamentals driving the market, instead we have Wall Street bidding prices higher. They are looking to test $87.15, the high three months ago."
Crude oil for September delivery climbed $1.20, or 1.5 percent, to $82.54 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $82.64, the highest level since May 5. Prices are up 15 percent from a year ago.
Brent crude for September settlement increased $1.83, or 2.3 percent, to $82.65 a barrel on the London-based ICE Futures Europe exchange. The contract reached $82.80, the highest level since May 6.
Oil rose above $80 in New York and London yesterday for the first time since May. Breaking through resistance in that area was a technical indicator to buy futures, said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York.
"We were stuck in a $72-to-$79.69 range for quite some time, and when prices broke above $79.69 yesterday we ran some stops and that brought in more buying," Bentz said. "The $79- to-$80 level may now act as support."
Euro Advances
The single European currency rose 0.4 percent versus the dollar to $1.3227. The euro reached $1.3262.
"With nothing stopping it, unless the dollar turns around and equities get weak again, we're going to push oil above $84 a barrel," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Consumer spending and personal incomes in the U.S. unexpectedly stagnated in June, showing a lack of jobs is hurting the biggest part of the economy.
The little-changed reading on purchases followed a 0.1 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today. Incomes didn't increase for the first time since September and the savings rate rose to a one-year high.
"The market is being very selective about what it looks at," said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. "There's been a focus on positive economic data and stocks when they move higher. The supply and demand situation and bad economic data are ignored."
Manufacturing Gauge
The Institute for Supply Management reported yesterday that its manufacturing gauge dropped to 55.5 in July from 56.2 the previous month. A reading greater than 50 points to expansion, and the median forecast of economists surveyed by Bloomberg News was 54.5.
"The ISM number, in effect, wasn't as bad as expected, which was positive for sentiment in oil and equity markets," said Harry Tchilinguirian, London-based head of commodity- markets strategy at BNP Paribas SA. "But the recent macro data flow indicates that activity has slowed down."
The Energy Department will probably report that crude-oil supplies fell 1.65 million barrels last week, according to the median of 16 analyst responses in a Bloomberg News survey.
Gasoline inventories declined 1 million barrels, according to the survey. It would be the first drop since the week ended June 18. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels. Seventeen respondents gave product-supply estimates.
The department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.
Oil volume on the Nymex was 460,413 contracts as of 2:34 p.m. in New York. Volume totaled 562,772 contracts yesterday, 18 percent below the average of the past three months. Open interest was 1.23 million contracts.
--With assistance from Barbara Powell in Dallas and Grant Smith in London. Editors: Joe Link, Richard Stubbe
