BLBG: Crude Oil Futures Increase Most in Two Weeks as Dollar Slips Against Euro
Crude oil rose the most in two weeks as the dollar dropped against the euro, bolstering the appeal of commodities as an alternative investment.
Oil climbed 1.7 percent after the greenback slipped against the common currency on a report showing that German business confidence unexpectedly increased to a three-year high in September. Futures extended gains after a U.S. report showed orders for capital equipment rebounded in August.
“Dollar weakness is propelling all of the commodity markets,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “Commodities aren’t being purchased for end usage, but as a store of value.”
Crude for November delivery rose $1.31 to $76.49 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 13. It was the biggest gain since Sept. 10, when the shutdown of an Enbridge Energy Partners LP pipeline curbed deliveries of Canadian oil to U.S. Midwest refineries. The November contract rose 2.1 percent this week.
Brent crude oil for November settlement gained 76 cents, or 1 percent, to end the session at $78.87 a barrel on the London- based ICE Futures Europe exchange.
The dollar declined to $1.3485 per euro, down 1.3 percent from $1.3314 yesterday. The U.S. currency touched $1.3493 against the euro, the lowest level since April.
“Gold, silver and platinum are all surging and the grains and livestock have been strong,” O’Grady said. “Energy has been the laggard in the commodity index. At some point before long we’re going to see it catch up with the metals and agricultural products.”
Commodity Rally
The greenback’s fall helped send gold to a record and silver to a 30-year high. The Reuters/Jefferies CRB Index of 19 commodities advanced 1.2 percent to 283.63, the highest level in eight months.
“Oil is finally following gold and the other commodities,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Oil was held back earlier this week by the bearish fundamentals. Demand is weak, inventories are at the highest level since they began keeping track and the economic news wasn’t great.”
U.S. consumption of petroleum products fell 1.8 percent to 19.2 million barrels a day last week, the Energy Department reported on Sept. 22. Total petroleum supplies, including crude oil and fuel, rose 3.3 million barrels to 1.14 billion last week, the highest level since at least 1990.
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 106.8 from 106.7 in August. That’s the highest level since June 2007. Economists had expected a drop to 106.4, according to the median of 36 forecasts in Bloomberg News survey.
U.S. Capital Goods
Bookings for U.S. goods like computers and communications gear rose 4.1 percent after a 5.3 percent decline in July that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Total orders fell 1.3 percent, depressed by volatile demand for aircraft. Orders excluding transportation equipment rose more than forecast.
The Standard & Poor’s 500 Index gained 2.1 percent to 1,148.67 at 4:15 p.m. The Dow Jones Industrial Average climbed 1.9 percent to 10,860.26.
“Equities are up and the dollar is under pressure, a combination that usually sends oil higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Oil also rises whenever there are headlines that point to an improving economy.”
JPMorgan Chase & Co. boosted its Brent price forecast for the fourth quarter of this year to $83 a barrel. The European benchmark, which is used to price two-thirds of global oil, will average $90 a barrel in the fourth quarter of 2011, the company predicted in a research note today.
Price Forecast
Crude may fall next week on speculation that U.S. supplies will climb as fuel demand falls, a Bloomberg News survey showed. Seventeen of 30 analysts, or 57 percent, forecast crude oil will decline through Oct. 1. Nine respondents, or 30 percent, predicted little change, and four estimated prices will rise.
Oil volume on the Nymex was 575,790 contracts as of 3:20 p.m. in electronic trading in New York. Volume totaled 616,993 contracts yesterday, 3.3 percent below the average of the past three months. Open interest was 1.32 million contracts.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
