BLBG: Crude Oil Rises as Weaker Dollar Spurs Demand From Investors
Crude oil gained after the U.S. currency retreated against the euro, spurring investor demand for dollar-priced commodities.
The euro rose for a second day against the dollar, trading for $1.3248 at 10:15 a.m. in London as concerns eased over financial losses by banks in Europe. Prices also rose after Venezuelan President Hugo Chavez said the Organization of Petroleum Exporting Countries may need to cut production by a further 4 million barrels a day.
“Crude futures have bounced back up earlier this morning, recovering from minor losses yesterday, and are tracking a weaker dollar,” said Andrey Kryuchenkov, a commodity analyst with VTB Capital in London. When the dollar weakens, some investors buy commodities as a hedge against inflation.
Crude oil for March delivery rose as much as $1.76, or 3.9 percent, to $47.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $46.40 at 10:27 a.m. London time.
OPEC agreed last month to cut output quotas by 9 percent to 24.845 million barrels a day starting Jan. 1 to prevent a glut and stem falling prices.
Chavez said the Venezuelan oil basket has averaged $35.85 this year, below the budgeted $60 a barrel, according to an e- mailed statement from the information ministry.
“If necessary, we’ll cut 4 million barrels more of production, but we’re not going to allow oil prices to drop to $6 a barrel again,” Chavez said.
OPEC Cuts
OPEC, responsible for about 40 percent of world supplies, is cutting output 5 percent this month, according to Geneva- based consulting company PetroLogistics Ltd. OPEC production will average 26.15 million barrels a day in January, the consultancy said on Jan. 23.
Oil on Nymex touched $32.40 a barrel on Dec. 19, the lowest since February 2004.
Goldman Sachs Group Inc. said risks to oil price movements are to the “downside” and gains made last week do not represent an end to the current bear market.
“We believe that it is premature to get long oil and prefer to remain short until inventories stop building and demand weakness subsides,” said a report by Goldman analysts including Jeffrey Currie in London.
Brent crude oil for March settlement gained as much as $1.44, or 3.1 percent, to $48.40 a barrel on London’s ICE Futures Europe exchange, and was trading at $47.33 at 10:16 a.m. local time.
In Australia, a tropical cyclone forced BHP Billiton Ltd., Woodside Petroleum Ltd. and several others to halt more than half of the nation’s oil output.
Fields Closed
BHP closed the Stybarrow and Griffin fields off the northwest coast, while Perth-based Woodside halted production at the Vincent, Enfield and Cossack fields, the companies said today. Apache Corp. and Adelaide-based Santos Ltd. also halted ventures, taking the total reported closures to about 265,000 barrels a day of oil and condensates.
U.S. oil inventories probably rose for the 16th time in 18 weeks as refineries reduced operating rates last week, a Bloomberg News survey of analysts showed.
Crude stockpiles probably increased 2.5 million barrels in the week ended Jan. 23 from 332.7 million the week before, according to the median of seven analyst estimates before an Energy Department report this week. All the analysts said supplies would rise from a 16-month high the week ended Jan. 16.
