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Oil rises more than 1% as dollar swings lower

Oil rises more than 1% as dollar swings lower
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First Published: Mon, Nov 23 2009. 12 58 PM IST
Updated: Mon, Nov 23 2009. 12 58 PM IST
Perth: Oil prices rose more than 1% to top $78 a barrel on Monday, after the US dollar lost its footing and heightened tensions between key oil exporter Iran and Western nations raised speculation of a potential supply threat.
The dollar, down 0.5% against a basket of currencies, was also a key factor in driving up prices of other commodities, with gold powering to a fresh record high of more than $1,160 an ounce.
Investors typically buy commodities as a hedge against inflation and a weaker US currency.
US crude for January delivery rose 96 cents to $78.43 a barrel by 0736 GMT, after having risen by $1 earlier. London Brent crude rose $1.04 to $78.24.
“The rising Iran tensions, alongside US dollar weakness and gold’s record high levels, have helped buoy oil prices,” said Michelle Kwek, an analyst at Informa Global Markets in Singapore.
Iran’s armed forces launched air defence war games on Sunday to show off the country’s deterrence capabilities in the face of Western pressure over its nuclear programme, and a cleric in the Revolutionary Guards warned the Islamic republic would fire missiles at “the heart of Tel Aviv” if attacked.
The threats came a day after senior officials from six world powers said they were disappointed Iran had not accepted proposals intended to delay its potential to make nuclear weapons, with US president Barack Obama having warned that there could be a package of sanctions against Iran within weeks.
While energy demand in the United States remains sluggish, crude consumption in China, the world’s No. 2 oil consumer, has rebounded strongly in recent months as its economy looks poised to post an impressive growth of around 8% this year.
China’s apparent oil demand in October rose 10.3% from a year earlier, the seventh rise in a row, as refiners produced at record rates among more signs of a solid recovery in the world third-largest economy.
Oil prices have gained about 75% so far this year, thanks to the weak dollar and signs of a global economic recovery, but they are still nearly 47% off their high of more than $147 a barrel in July 2008.
Analysts said oil prices have been trading within the $75-$82 band of the past one month and would need a lot more upside pressure to leap out of the $82 levels.
Barclays Capital said in a research note on Friday the upside would also probably be capped by Opec, which has indicated that any quick run-up in prices is likely to be met by a proactive approach to calm them, and until distillate demand showed some sustained improvements.
With a raft of economic data on tap in the United States in a holiday-thinned week, including existing home sales on Monday, revised GDP figures on Tuesday and the minutes of Fed’s last policy meeting the day after, investors are set to scrutinise the numbers for signs of economic activity perking up in the world’s top oil consumer.
Money managers boosted net long crude oil positions on the New York Mercantile Exchange in the week through 17 November, the Commodity Futures Trading Commission said in a report on Friday.
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First Published: Mon, Nov 23 2009. 12 58 PM IST
More Topics: Markets | Oil | Crude oil | Dollar | Iran |