MW: Oil futures climb more than 2% as dollar weakens
By Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures climbed Monday as news that Germany and France have pledged to do everything to support European banks eased worries about the fallout from the region’s debt troubles and sparked a U.S. dollar retreat.
Crude oil for November delivery CL1X +3.27% added $2.02, or 2.4%, to $85 a barrel on the New York Mercantile Exchange. Prices had climbed 4.8% last week.
The latest gains came amid news that German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on the need to strengthen European banks and Merkel said they are both determined to do all that is necessary to guarantee bank recapitalization.
The two leaders said the package of measures will be revealed by the end of the month. Read more about the Sunday meeting.
The statement rallied the euro EURUSD +2.10% and sank the dollar. The euro rose to $1.3634 from $1.3401 in late North American trading Friday. The U.S. dollar index, which tracks the performance of the greenback against a basket of six other major currencies, fell to 77.603 from 78.660 late Friday. Read more about currencies action.
“The big decline in the USD today is breathing life into a lot of things, helping West Texas [Intermediate crude oil prices] to gain an outsized move,” said Richard Hastings, a macro strategist at Global Hunter Securities.
Overall, “there is a favorable set of fundamentals giving support to crude oil right now, including strong job retention in the U.S., more evidence that [third-quarter] industrial and cyclical earnings will come in strong, and a firming up of the demand story especially in the U.S.,” he said. “This process is taking dollars out of the money markets and putting them back to work in stocks and commodities.”
For the near term, prices should trend between $82 and $86, he said.
On Saturday, Saudi Arabia Oil Co. chief executive Khalid Al Falih said, in an interview with the Wall Street Journal, that his country was unlikely to proceed with plans to raise its oil output capacity to 15 million barrels per day. Read the Wall Street Journal article.
Other energy prices tracked oil higher Monday. November gasoline RB1X +2.42% climbed 6 cents, or 2.2%, at $2.71 a gallon. Heating oil HO1X +1.98% for November delivery added 4 cents, or 1.5%, to $2.90 a gallon.
November natural gas NG11X +1.95% tacked on 4 cents, or 1.2%, to trade at $3.52 per million British thermal units, leading losses among energy products.
