BLBG: Oil Reverses Losses to Trade Above $72 as Dollar Weakens, Equities Rebound
Crude oil climbed more than $1 as the dollar weakened to a six-week low against the euro and advancing equities boosted speculation that the global economic recovery will spur fuel demand.
Oil jumped as much as 2.3 percent as the U.S. currency’s decline strengthened the appeal of commodities as an alternative investment. Equities rose from a 10-month low, after a Spanish bond sale quelled concern the nation will struggle to fund its deficit.
“The equity markets are stronger and the dollar’s a little weaker,” said Kyle Cooper, managing director at energy consultant IAF Advisors in Houston. “They remain very tightly linked. It’s going to take extreme inventory levels to break that link.”
Oil for August delivery rose $1.47, or 2 percent, to $73.61 a barrel at 10:12 a.m. on the New York Mercantile Exchange. Earlier, futures touched $73.83. Prices have increased 15 percent in the past year.
The S&P 500 gained 1.9 percent to 1,041.87. The Dow Jones Industrial Average increased 163.63 points, or 1.7 percent to 9,850.11.
“People pulled out of equities because of the long weekend and then flooded back in, and I think that’s what’s going to drive oil today.” said Rich Ilczyszyn, a senior market strategist with broker Lind-Waldock in Chicago. “Right now the main component of the oil market is the equities.”
U.S. commodity and equity markets were closed yesterday for the Independence Day holiday.
Dollar Weakens
The dollar declined 0.8 percent against the euro. The European currency was at $1.2636, compared with $1.2538 yesterday. It touched $1.2638, the lowest level since May 21 on an intraday basis.
“The dollar is down, which is supportive,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “There’s probably going to be another crude draw this week, and the market was probably oversold heading into the holiday weekend.”
U.S. oil inventories fell 2 million barrels in the week ended June 25 to 363.1 million barrels, the Energy Department reported last week.
Brent crude for August delivery gained $1.61, or 2.3 percent, to $73.08 a barrel on London’s ICE Futures Europe exchange.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
