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Oil prices slip after dollar grows stronger
Source: Agencies |
November 10, 2010, Wednesday
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OIL prices slipped yesterday after revving to a two-year high as the dollar grew stronger, discouraging some traders.
Benchmark oil for December delivery lost 34 cents to settle at US$86.72 a barrel on the New York Mercantile Exchange.
Earlier in the day, a weaker dollar helped propel oil to US$87.63 a barrel, the highest level since October 2008, when the depth of the global financial crisis took hold.
But the dollar grew stronger as the day wore on. Since commodities are priced in dollars, a stronger dollar means they become more expensive for buyers who use other currencies.
Oil and other energy prices have been climbing for weeks as traders have taken advantage of a weaker dollar stemming from the Federal Reserve's multibillion dollar bond-buying program designed to revitalize the economy.
That might boost lending but the influx of dollars weakens the value of the U.S currency.
"While the market seems to be grinding higher, it doesn't seem to want to back off from these new highs we keep making," Tradition Energy analyst Gene McGillian said.
Many analysts think oil could top US$90 a barrel by the end of the year. PFGBest analyst Phil Flynn said one thing holding back a stronger rally are still-plentiful supplies of oil and gasoline and muted demand.
The International Energy Agency said has predicted global energy consumption will rise 36 percent to 16.7 billion metric tons of oil equivalent by 2035.
China's demand will jump 75 percent, which will account for more than a third of increase in energy use, the IEA predicted in its annual World Energy Outlook.
The IEA report also predicted oil prices could hit US$135 a barrel and would average US$113 a barrel by 2035, compared to an average of US$60 in 2009. It said higher prices are needed to bring demand into balance with supply.
The IEA is the energy arm of the Organization for Economic Cooperation and Development, which is a group of the world's richest nations.
Meanwhile, a cold snap in the Northeast and the Rockies has traders thinking demand may strengthen for heating oil and natural gas as the winter heating season gets under way.
While heating oil is a key fuel to warm homes in the Northeast, natural gas fires a number of power plants that produce electricity in other parts of the country.
In Nymex trading in December contracts, heating oil added 0.9 cent to settle at US$2.4067 a gallon, gasoline gained 0.65 cent to US$2.1850 a gallon and natural gas added 12.2 cents to US$4.210 per 1,000 cubic feet.
In London, Brent crude gave up 13 cents to settle at US$88.33 a barrel on the ICE Futures exchange.
Benchmark oil for December delivery lost 34 cents to settle at US$86.72 a barrel on the New York Mercantile Exchange.
Earlier in the day, a weaker dollar helped propel oil to US$87.63 a barrel, the highest level since October 2008, when the depth of the global financial crisis took hold.
But the dollar grew stronger as the day wore on. Since commodities are priced in dollars, a stronger dollar means they become more expensive for buyers who use other currencies.
Oil and other energy prices have been climbing for weeks as traders have taken advantage of a weaker dollar stemming from the Federal Reserve's multibillion dollar bond-buying program designed to revitalize the economy.
That might boost lending but the influx of dollars weakens the value of the U.S currency.
"While the market seems to be grinding higher, it doesn't seem to want to back off from these new highs we keep making," Tradition Energy analyst Gene McGillian said.
Many analysts think oil could top US$90 a barrel by the end of the year. PFGBest analyst Phil Flynn said one thing holding back a stronger rally are still-plentiful supplies of oil and gasoline and muted demand.
The International Energy Agency said has predicted global energy consumption will rise 36 percent to 16.7 billion metric tons of oil equivalent by 2035.
China's demand will jump 75 percent, which will account for more than a third of increase in energy use, the IEA predicted in its annual World Energy Outlook.
The IEA report also predicted oil prices could hit US$135 a barrel and would average US$113 a barrel by 2035, compared to an average of US$60 in 2009. It said higher prices are needed to bring demand into balance with supply.
The IEA is the energy arm of the Organization for Economic Cooperation and Development, which is a group of the world's richest nations.
Meanwhile, a cold snap in the Northeast and the Rockies has traders thinking demand may strengthen for heating oil and natural gas as the winter heating season gets under way.
While heating oil is a key fuel to warm homes in the Northeast, natural gas fires a number of power plants that produce electricity in other parts of the country.
In Nymex trading in December contracts, heating oil added 0.9 cent to settle at US$2.4067 a gallon, gasoline gained 0.65 cent to US$2.1850 a gallon and natural gas added 12.2 cents to US$4.210 per 1,000 cubic feet.
In London, Brent crude gave up 13 cents to settle at US$88.33 a barrel on the ICE Futures exchange.
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