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Oil rises on growing trader confidence
Source: Agencies |
December 24, 2010, Friday
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OPTIMISTIC economic news helped push the price of oil above US$91 a barrel yesterday - the highest it's been in more than two years.
Benchmark crude for February delivery rose US$1.03 to settle at US$91.51 on the New York Mercantile Exchange.
Most analysts say oil prices have been rising not because of strong demand and dwindling supplies, but on hopes that an improving economy usually means more demand for oil and gas
The Commerce Department said that consumers spent more in November than the month before. And the Labor Department said that the number of Americans applying for unemployment benefits for the first time fell by 3,000 last week to 420,000.
A weaker dollar also supported higher oil prices. Since oil is priced in dollars, it becomes more affordable to investors with foreign currency like the euro as the dollar falls.
The PortiaGroup-OSIP study says higher gas pump prices are taking a bigger bite out of U.S. household spending: an average 7.4 percent of median household income compared with 6.5 percent last year and 4.2 percent in 2008. If the pattern of higher oil prices persists, the average share of income spent on gasoline could rise to almost 10 percent by spring, with pump prices around US$3.75 or more a gallon.
While oil and gasoline prices are climbing, the price of one of the main heating sources in the U.S. - natural gas - is falling. It's down about 11 percent in the past two weeks. Yesterday natural gas lost 6.9 cents to settle at US$4.083 per 1,000 cubic feet on the Nymex.
Much of the nation has shivered through below-average temperatures in December, and yesterday the Energy Department said the U.S. natural gas supplies shrank last week by 184 billion cubic feet. But there is so much natural gas in storage - almost three and a half trillion cubic feet, or more than 8 percent more than the five-year average - that prices have stayed relatively low.
Some weather forecasters think winter's icy grip will ease next month, which could keep natural gas prices down. "Slightly decreased heating demand in January is expected along a large swath of the country from Texas through the Mid-Atlantic region and north into New York and New England," said Chris Kostas, senior power and gas analyst with consultants Energy Security Analysis Inc. "The softer-than-normal power demand should also reduce gas demand for power generation along the East Coast in January," Kostas added.
Natural gas is used to generate about 20 percent of the nation's electricity.
In other Nymex trading, heating oil rose 1.23 cents to settle at US$2.5408 per gallon and gasoline gained 1.81 cents to settle at US$2.4426 per gallon.
In London, Brent crude rose 60 cents to settle at US$94.25 on the ICE Futures exchange.
Benchmark crude for February delivery rose US$1.03 to settle at US$91.51 on the New York Mercantile Exchange.
Most analysts say oil prices have been rising not because of strong demand and dwindling supplies, but on hopes that an improving economy usually means more demand for oil and gas
The Commerce Department said that consumers spent more in November than the month before. And the Labor Department said that the number of Americans applying for unemployment benefits for the first time fell by 3,000 last week to 420,000.
A weaker dollar also supported higher oil prices. Since oil is priced in dollars, it becomes more affordable to investors with foreign currency like the euro as the dollar falls.
The PortiaGroup-OSIP study says higher gas pump prices are taking a bigger bite out of U.S. household spending: an average 7.4 percent of median household income compared with 6.5 percent last year and 4.2 percent in 2008. If the pattern of higher oil prices persists, the average share of income spent on gasoline could rise to almost 10 percent by spring, with pump prices around US$3.75 or more a gallon.
While oil and gasoline prices are climbing, the price of one of the main heating sources in the U.S. - natural gas - is falling. It's down about 11 percent in the past two weeks. Yesterday natural gas lost 6.9 cents to settle at US$4.083 per 1,000 cubic feet on the Nymex.
Much of the nation has shivered through below-average temperatures in December, and yesterday the Energy Department said the U.S. natural gas supplies shrank last week by 184 billion cubic feet. But there is so much natural gas in storage - almost three and a half trillion cubic feet, or more than 8 percent more than the five-year average - that prices have stayed relatively low.
Some weather forecasters think winter's icy grip will ease next month, which could keep natural gas prices down. "Slightly decreased heating demand in January is expected along a large swath of the country from Texas through the Mid-Atlantic region and north into New York and New England," said Chris Kostas, senior power and gas analyst with consultants Energy Security Analysis Inc. "The softer-than-normal power demand should also reduce gas demand for power generation along the East Coast in January," Kostas added.
Natural gas is used to generate about 20 percent of the nation's electricity.
In other Nymex trading, heating oil rose 1.23 cents to settle at US$2.5408 per gallon and gasoline gained 1.81 cents to settle at US$2.4426 per gallon.
In London, Brent crude rose 60 cents to settle at US$94.25 on the ICE Futures exchange.
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