BLBG: Oil Rises to Two-Year High as Equities, Dollar Offset Supplies
Nov. 9 (Bloomberg) -- Oil surged to a two-year high as advancing equities and a weakening dollar tempered concern of rising excess crude supplies in the U.S., the world’s largest oil consumer.
Futures advanced for a seventh day as the dollar retreated from a one-week high against the euro. An Energy Department report tomorrow may show that crude stockpiles in the U.S. increased 1.75 million barrels last week from 368.2 million, according to a Bloomberg News survey of analysts. That would take it to the largest amount since May 2009.
“Financial factors like the euro-dollar and equities are driving the recovery, but sustained gains on the back of fundamentals are unlikely,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Inventories are plentiful, there are no serious supply disruptions and the dollar rebound is capping gains.”
Crude for December delivery rose as much as 57 cents, or 0.7 percent, to $87.63 a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest price since Oct. 9, 2008. It was at $87.45 as of 11:10 a.m. London time. The contract earlier fell to a low of $86.44. Brent crude for December gained 35 cents to $88.81 a barrel on the London-based ICE Futures exchange.
Yesterday, the New York contract advanced 21 cents to $87.06, the highest settlement since Oct. 8, 2008.
Futures, which surged 78 percent in 2009, have gained 9.4 percent this year. Prices rallied in the past six days, matching the longest rising streak since April.
The dollar traded for $1.3925 against the single European currency as of 10:54 a.m. London time, from $1.3824 earlier.
Inverse Correlation
Oil has increasingly moved in the opposite direction to the dollar. New York crude futures showed a correlation of minus 0.79 with the currency today, dropping from 0.54 on May 4, according to data compiled by Bloomberg. A correlation of minus 1 means the two moved in opposite directions and 1 signals they moved in tandem.
“There continues to be the inverse correlation between the U.S. dollar movements and the oil price,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Crude stocks are still relatively high.”
U.S. crude stockpiles have increased for three weeks to 14 percent above the five-year average level, as refiners cut processing to the lowest rate since March, the Energy Department said last week.
Gasoline inventories probably decreased 1 million barrels in the week ended Nov. 5 from 212.3 million, according to the Bloomberg News survey. Distillate fuel stockpiles, including heating oil and diesel, are expected to have fallen 2.1 million barrels from 164.9 million, the survey showed.
The Energy Department will release its Weekly Petroleum Status Report at 10:30 a.m. tomorrow in Washington. The industry-funded American Petroleum Institute will publish its own data today.
--With assistance from Ben Sharples in Melbourne. Editors: Raj Rajendran, Alex Devine.
To contact the reporters 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
