BLBG: Oil Gains a Third Day as Weaker Dollar Spurs Inflation Hedging
Crude oil rose for a third day in New York as the dollar dropped against the euro, bolstering the appeal of commodities as a currency hedge.
Oil rebounded after the U.S. Energy Department reported yesterday that crude stockpiles rose for a seventh week to the highest since September 1990. The U.S. currency dropped the most in a week against the euro, increasing demand for crude as a defense against rising inflation.
“The market is reacting to the weaker dollar,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. “This is desperately needed after yesterday’s bearish inventory data. And the market is drawing support from the fact that European equities are not down so much as they were earlier.”
Crude oil for June delivery rose as much as $1.07, or 2.2 percent, to $49.92 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $49.47 at 1:44 p.m. London time.
The euro rose against the yen and the dollar after a report showed an index of European services and manufacturing industries increased more than economists expected, adding to evidence the region’s slump is easing.
The common European currency traded at $1.3057 after falling as low as $1.2980.
Europe’s Dow Jones Stoxx 600 Index was 0.6 percent higher at 193.44 as of 1:25 p.m. in London, after declining as much as 1 percent earlier.
‘Market Buffeted’
“For now the oil market will remain buffeted between bearish fundamentals and bouts of optimism coming from the equity markets,” said Harry Tchilinguirian, senior oil market analyst at BNP Paribas SA in London. “The surplus in U.S. crude inventories is quite certain.”
The 3.86 million barrels gain in stockpiles compares with analyst expectations of 2.5 million-barrel gain in a Bloomberg News survey. Gasoline inventories climbed 802,000 barrels to 217.3 million. A 700,000-barrel decline in the motor fuel was forecast.
Refineries operated at 83.4 percent of capacity, up 3.1 percentage points from the prior week and the highest since January, the report showed. It was the biggest increase since the week ended Dec. 5.
“Even with the refinery utilization number increasing by 3 percent, which is pretty big, there was a bigger build in crude stocks than people anticipated,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “That tells you right away there is too much crude.”
Brent crude oil for June settlement advanced 28 cents, or 0.6 percent, to $50.09 a barrel on London’s ICE Futures Europe Exchange, after falling as much as 56 cents, or 1.1 percent, to $49.25 a barrel.
