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Oil settles above US$100 as dollar sinks
Source: Agencies |
June 3, 2011, Friday
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CRUDE oil has long been considered a relatively safe investment, because the world runs on oil and needs more of it every day.
Investors moved into oil again yesterday despite another round of gloomy economic news. They fled the dollar and bought oil futures after Moody's Investment Service said it might review the credit rating of the US, if Congress and the White House don't agree to raise the nation's borrowing limit. Moody's also said it will review the ratings of Bank of America, Citigroup and Wells Fargo & Co. for possible downgrades
"They always run to oil when the dollar is weak," PFGBest analyst Phil Flynn said. "They're going to look for something that has some real value."
Benchmark West Texas Intermediate for July delivery added 11 cents to settle at US$100.40 per barrel on the New York Mercantile Exchange. Prices increased even though oil and gasoline demand continue to sink in the US, the world's largest petroleum consumer.
The Energy Information Administration reported yesterday that demand for petroleum products dropped last week for the fourth week in a row. The four-week average declined 5 percent compared with the same period last year. Demand for wholesale gasoline fell for the 10th week in a row, the EIA said.
"The American consumer is cutting back on consumption with a vengeance," independent oil analyst Jim Ritterbusch said. "It's not just anecdotal evidence. It's showing up everywhere."
Oil has hovered around US$100 per barrel for nearly a month as economists and investors assess the impact on the economy from the recent run-up in oil and gasoline. At the end of April oil was close to US$114 a barrel, the highest level in three years. Experts worried that soaring energy prices would slow or even stop the economic recovery.
The Commerce Department said yesterday that businesses cut back on orders for heavy machinery, computers and autos in April, though the decline was partly due to a slowdown in manufacturing following the Japanese earthquake in March.
A weak reading on retail sales also suggested that high gasoline prices are forcing shoppers to pull back on discretionary items like clothing and home furnishings. And while fewer people applied for unemployment benefits last week, the 422,000 claims reported by the Labor Department indicated that jobs remain hard to find for many people.
The EIA report said oil supplies unexpectedly increased last week, adding 2.9 million barrels to the country's stockpile. Analysts expected supplies to fall by 1.9 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Gasoline supplies also increased - by 2.6 million barrels - more than double what analysts expected, as refineries stepped up production.
Natural gas stocks increased less than expected last week to a total of 2.1 trillion cubic feet. Natural gas for July delivery jumped 16.5 cents, about 3.6 percent, to settle at US$4.794 per 1,000 cubic feet.
Analysts will closely monitor next week's meeting of the Organization of Petroleum Exporting Countries in Vienna. OPEC ministers could decide to increase production to meet rising world demand and to make up for the loss of Libya's high-quality crude exports, which were cut off by unrest there. More OPEC production could help keep oil prices down this summer, but it could also eliminate spare production capacity and result in tighter supplies later.
In other Nymex trading for July contracts, heating oil added 3.52 cents to settle at US$3.0439 per gallon, while gasoline futures gave up less than a penny to settle at US$2.9677 per gallon.
In London, Brent crude gained US$1.01 to settle at US$115.54 per barrel on the ICE Futures exchange.
Investors moved into oil again yesterday despite another round of gloomy economic news. They fled the dollar and bought oil futures after Moody's Investment Service said it might review the credit rating of the US, if Congress and the White House don't agree to raise the nation's borrowing limit. Moody's also said it will review the ratings of Bank of America, Citigroup and Wells Fargo & Co. for possible downgrades
"They always run to oil when the dollar is weak," PFGBest analyst Phil Flynn said. "They're going to look for something that has some real value."
Benchmark West Texas Intermediate for July delivery added 11 cents to settle at US$100.40 per barrel on the New York Mercantile Exchange. Prices increased even though oil and gasoline demand continue to sink in the US, the world's largest petroleum consumer.
The Energy Information Administration reported yesterday that demand for petroleum products dropped last week for the fourth week in a row. The four-week average declined 5 percent compared with the same period last year. Demand for wholesale gasoline fell for the 10th week in a row, the EIA said.
"The American consumer is cutting back on consumption with a vengeance," independent oil analyst Jim Ritterbusch said. "It's not just anecdotal evidence. It's showing up everywhere."
Oil has hovered around US$100 per barrel for nearly a month as economists and investors assess the impact on the economy from the recent run-up in oil and gasoline. At the end of April oil was close to US$114 a barrel, the highest level in three years. Experts worried that soaring energy prices would slow or even stop the economic recovery.
The Commerce Department said yesterday that businesses cut back on orders for heavy machinery, computers and autos in April, though the decline was partly due to a slowdown in manufacturing following the Japanese earthquake in March.
A weak reading on retail sales also suggested that high gasoline prices are forcing shoppers to pull back on discretionary items like clothing and home furnishings. And while fewer people applied for unemployment benefits last week, the 422,000 claims reported by the Labor Department indicated that jobs remain hard to find for many people.
The EIA report said oil supplies unexpectedly increased last week, adding 2.9 million barrels to the country's stockpile. Analysts expected supplies to fall by 1.9 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Gasoline supplies also increased - by 2.6 million barrels - more than double what analysts expected, as refineries stepped up production.
Natural gas stocks increased less than expected last week to a total of 2.1 trillion cubic feet. Natural gas for July delivery jumped 16.5 cents, about 3.6 percent, to settle at US$4.794 per 1,000 cubic feet.
Analysts will closely monitor next week's meeting of the Organization of Petroleum Exporting Countries in Vienna. OPEC ministers could decide to increase production to meet rising world demand and to make up for the loss of Libya's high-quality crude exports, which were cut off by unrest there. More OPEC production could help keep oil prices down this summer, but it could also eliminate spare production capacity and result in tighter supplies later.
In other Nymex trading for July contracts, heating oil added 3.52 cents to settle at US$3.0439 per gallon, while gasoline futures gave up less than a penny to settle at US$2.9677 per gallon.
In London, Brent crude gained US$1.01 to settle at US$115.54 per barrel on the ICE Futures exchange.
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