BLBG:Crude Oil Advances as Dollar’s Decline Bolsters Commodities
Crude oil rose as the dollar fell against the euro and other currencies, increasing the investment appeal of commodities denominated in the U.S. currency.
Futures climbed 1.1 percent as the dollar dropped against most of its major counterparts. Oil pared gains after a U.S. Energy Department report showed an unexpected increase in crude oil inventories and equities retreated.
“The decline of the dollar is increasing demand for all things priced in the currency, such as oil and gold,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “If the dollar continues to fall, you are going to see a further rally in commodities.”
Crude oil for September delivery rose 93 cents to $87.58 a barrel on the New York Mercantile Exchange. Futures have increased 16 percent in the past year.
Brent oil for October settlement climbed $1.47, or 1.3 percent, to end the session at $110.60 a barrel on the London- based ICE Futures Europe exchange.
The dollar declined 0.3 percent to $1.4451 against the euro at 3:16 p.m. in New York. The Dollar Index, which measures the greenback against other major currencies, fell 0.4 percent. The Standard & Poor’s GSCI Index of 24 raw materials rose 1 percent to 657.22. Twenty of the commodities advanced.
Fuel Stockpiles
U.S. crude oil supplies rose 4.23 million barrels to 354 million in the week ended Aug. 12, the Energy Department said today. Inventories were forecast to decline 500,000 barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.
“We came off about a dollar after the inventory numbers, but they weren’t bearish enough to change the direction of the market,” said Chris Dillman, an analyst at Tradition Energy in Stamford, Connecticut.
The U.S. Strategic Petroleum Reserve is releasing stockpiles in coordination with the Paris-based International Energy Agency. The Energy Department has delivered 20.4 million barrels of oil from emergency reserves since July 17, according to its website. The government sold 30.64 million barrels to companies in cooperation with the IEA.
“The crude build was an eye opener but when juxtaposed against an SPR draw of 5.9 million, net crude declined,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston. “You got another draw at Cushing.”
Cushing Inventories
Crude oil stockpiles at Cushing, Oklahoma, the delivery point for the New York contract, declined 893,000 barrels to 33.7 million, the lowest level since November, Energy Department figures showed.
Supplies of distillate fuel, a category that includes heating oil and diesel, increased 2.45 million barrels to 154 million, the highest level since March.
Gasoline stockpiles dropped 3.51 million barrels to 210.1 million last week, the biggest decline since April 8. Production of the fuel decreased 2.2 percent to 9.32 million barrels a day. Consumption of the motor fuel fell 0.5 percent to 9.2 million barrels in the week ended Aug. 12, down 2.8 percent from a year earlier, the report showed.
“The drop in gasoline supplies was an example of inventory management by refiners,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It’s late in the driving season and the focus of refiners is shifting to distillate fuel. Gasoline supplies dropped because refinery output fell, not because of rising demand.”
Refinery Use
Refinery use dropped to 89.1 percent of capacity from 90 percent. U.S. refineries boost distillate-fuel output during the second half of the year, making diesel for farm machinery and heating oil for winter use in the Northern Hemisphere. U.S. gasoline demand peaks during June, July and August.
Gasoline for September delivery gained 1.65 cents, or 0.6 percent, to end the session at $2.8703 a gallon in New York. Prices have risen 47 percent in the past year.
Iran’s foreign minister said today the nation sees no grounds for increasing output quotas by the Organization of Petroleum Exporting Countries. There is sufficient supply of oil in the market, Minister Ali Akbar Salehi said in Moscow.
OPEC crude output increased in July to the highest level since December 2008, led by gains in Saudi Arabia and Angola, a Bloomberg News survey on July 29 showed. Production climbed 245,000 barrels, or 0.8 percent, to average 29.565 million barrels a day, according to the survey of oil companies, producers and analysts.
Oil volume in electronic trading on the Nymex was 605,916 contracts as of 3:17 p.m. in New York. Volume totaled 742,508 contracts yesterday, 9 percent above the average of the past three months. Open interest was 1.55 million contracts.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
