BLBG: Crude Oil Rises a Second Day as Dollar Weakens to 15-Year Low Against Yen
Oil gained for a second day as the dollar slumped to a 15-year low against the yen, drawing investors to use commodities priced in the U.S. currency as a hedge against inflation.
Crude rose as much as 1.6 percent as a pledge by the Group of 20 nations to avoid “competitive devaluation” in currencies heightened speculation that the Federal Reserve will announce another round of bond purchases next week. Strikes at French refineries will continue at least until Oct. 28, union officials said, and may curtail European fuel exports to the U.S.
“Renewed weakness in the dollar, combined with China-led demand for raw materials, is propelling the crude market higher again today,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “Prices would be even higher if Saudi Arabia were not feeding extra barrels to the market.”
Oil for December delivery rose as much as $1.30 to $82.99 a barrel on the New York Mercantile Exchange, and was at $82.47 at 11:27 a.m. London time. Brent crude for December settlement was up 67 cents at $83.63 a barrel on the ICE Futures Europe exchange in London.
G-20 officials, who ended talks in South Korea on Oct. 23, agreed to let markets set foreign-exchange values. The dollar fell as much as 0.9 percent to $1.4080 against the euro.
September output data for Saudi Arabia compiled by Bloomberg shows the nation to be supplying about 2 million barrels a day in excess of the quota allocated by the Organization of Petroleum Exporting Countries.
Hurricane Downgraded
Hurricane Richard weakened and was downgraded to a tropical storm with maximum winds of about 65 miles per hour (105 kilometers per hour) as it passed over northern Guatemala, the U.S. National Hurricane Center said.
The storm was moving west northwest at about 12 mph about 90 miles west of Belize City, the Miami-based center said in its advisory posted just before 5 a.m. local time. The government in Mexico discontinued its warnings for coastal waters.
“What’s really driving up the oil price today is the dollar,” Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore, said. “There are other factors that are supportive, like the ongoing strikes in France. It looks like France now will have to import fuels.”
Industrial action across France over plans by President Nicolas Sarkozy to raise the age for retirement and pensions have caused nine of 11 refineries to shut and the other two to run at reduced rates, disrupting shipments to foreign markets. The stoppages, which began at the port of Marseille on Sept. 27, may have cut gasoline production by about 300,000 barrels a day, according to Credit Agricole CIB.
Supply Disruptions
One quarter of France’s service stations faced supply disruptions and fuel shortages will worsen today, according to union officials.
Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended Oct. 19, the Commodity Futures Trading Commission said last week.
Managed money bets that prices will rise, in futures and options combined, outnumbered short positions by 163,641 futures, the Washington-based regulator said in its weekly Commitments of Traders report. Net long positions fell by 15,097 contracts, or 8.5 percent, from a week earlier.
Crude may decline this week, according to a Bloomberg survey of 30 analysts. Fourteen of 30 respondents, or 47 percent, forecast prices will fall through Oct. 29. Eleven economists predicted prices will be little changed and five estimated an increase.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
