BLBG; Crude Oil Fluctuates Along With Equities as Dollar, Demand Drop
Crude oil fluctuated along with the stock market as the dollar fell to a four-month low against the euro and the recession cut U.S. fuel demand.
Oil rose as much as 1.5 percent in New York early today after the dollar dipped against major currencies on speculation the U.S. may lose its AAA credit rating. Fuel consumption in the past four weeks dropped 7.6 percent from a year earlier, a U.S. Energy Department report on May 20 showed.
“There is no fundamental reason for higher prices,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “There has been a preference for tangibles, such as oil, which is supporting prices.”
Crude oil for July delivery rose 8 cents to $61.33 a barrel at 10:23 a.m. on the New York Mercantile Exchange. The July contract is heading for a 7.2 percent gain this week. Prices are up 37 percent this year.
The U.S. economy will probably be slow to recover as banks tighten lending and consumers boost savings, Federal Reserve Bank of Boston President Eric Rosengren said yesterday.
The dollar declined 0.8 percent to $1.3997 per euro, from $1.389 yesterday. It earlier touched $1.403, the lowest level since Jan. 2.
“Oil and other hot commodities operate as essentially an inflation hedge when the dollar drops,” said Nauman Barakat, senior vice president of energy at Macquarie Futures USA Inc. in New York. “They become a good way to store value.”
Brent crude for July settlement rose 23 cents, or 0.4 percent, to $60.15 a barrel on London’s ICE Futures Europe exchange. Futures touched $60.94, the highest since Nov. 10.
