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Crude Oil Rises to 25-Month High in New York as Dollar Tumbles
2010-12-03 20:59:49.371 GMT
By Margot Habiby and Mark Shenk
Dec. 3 (Bloomberg) -- Crude oil rose to the highest level
in 25 months as the dollar tumbled, boosting the appeal of
commodities as an alternative investment.
Oil jumped 1.4 percent as the Dollar Index dropped to the
lowest level since Nov. 23 after U.S. employers added fewer jobs
than forecast in November. The unemployment rate unexpectedly
increased. Futures for delivery from 2013 through 2018 fell
below the current month's price.
"The rally is due to a much lower dollar," said Hamza
Khan, an analyst with Schork Group Inc., a consulting company in
Villanova, Pennsylvania. "This is not based on fundamentals."
Oil for January delivery rose $1.19 to settle at $89.19 a
barrel on the New York Mercantile Exchange, the highest closing
price since Oct. 7, 2008. Futures increased 6.5 percent this
week and 12 percent this year.
Oil futures for delivery in March 2012 fell as nearer-term
contracts rallied, a sign that participants are reducing bets on
the steepness of a price increase in the next few years. The
long-term contracts moved into a market structure known as
backwardation.
"The movement has been at work for a while, and it is what
you expect when the fundamentals are tightening," said Costanza
Jacazio, a commodities analyst at Barclays Capital in New York.
"From the end of September we've seen a major rebalancing. The
trend has changed."
Dollar Index
The Dollar Index, which tracks the currency against six
others, dropped 1.1 percent, the most since Oct. 20 as of 2:38
p.m. in New York. The U.S. currency fell 1.2 percent to $1.3371
per euro, compared with $1.3209 yesterday.
The Thomson Reuters/Jefferies CRB Index of 19 commodities
advanced 1.3 percent to 316.16, the strongest level since Nov.
10. Fifteen of the commodities increased.
"The rally continues, with $90 now in our sights," said
Gene McGillian, an analyst and broker at Tradition Energy in
Stamford, Connecticut. "We shrugged off the unemployment
numbers because of the way the dollar reacted to it."
U.S. payrolls increased 39,000, less than the most
pessimistic projection of economists surveyed by Bloomberg News,
according to Labor Department figures released today in
Washington, a signal fuel demand may be slow to rebound. The
jobless rate rose to 9.8 percent, the most since April, Labor
Department figures showed today.
Fuel Consumption
U.S. fuel consumption decreased 1.8 percent in the week
ended Nov. 26 to 18.5 million barrels a day, the lowest level
since the seven days ended Oct. 15, an Energy Department report
showed this week. It was the third weekly decline.
"When the market doesn't sell off on bearish news, it
shows that there's some sort of internal strength there,' said
Matt Smith, a commodities analyst for Summit Energy in
Louisville, Kentucky.
The Institute for Supply Management's non-manufacturing
index, which covers about 90 percent of the economy, rose to 55
in November from 54.3 a month earlier. A reading higher than 50
signals growth.
Crude oil extended gains, touching $89.33 a barrel in
intraday trading after breaking technical support at $88.63, the
high from Nov. 11.
"Some of this is just ongoing bullish market sentiment
that was only briefly influenced by the employment report,"
said Tim Evans, an energy analyst at Citi Futures Perspective in
New York. "The softer U.S. dollar is a focus, although that has
been a real argument of convenience. We're not applying it in
any sort of consistent way."
$120 Oil
Oil will advance to $120 a barrel before the end of 2012 as
consumption grows in emerging economies, according to a report
today from JPMorgan Chase & Co.
Crude futures in New York will average $93 a barrel next
year, up from a previous estimate of $89.75, and Brent crude
traded in London will average $95 a barrel, compared with an
earlier assessment of $91.75, the bank's analysts forecast.
"Strong emerging oil demand growth over the next 24 months
is very likely to lift the call on OPEC production to levels
last seen at the peak of the oil price spike in 2008," analysts
led by Lawrence Eagles in New York said.
The Organization of Petroleum Exporting Countries, which is
responsible for about 40 percent of global supplies, is unlikely
to increase production in the first half of next year unless
prices surge through $100 a barrel, the analysts said. OPEC oil
ministers meet Dec. 11 in Quito, Ecuador.
Brent crude for January settlement on the ICE Futures
Europe exchange in London gained 73 cents, or 0.8 percent, to
$91.42 a barrel. Earlier, it reached a two-year high of $91.85 a
barrel.
Oil volume in electronic trading on the Nymex was 756,029
contracts as of 2:42 p.m. in New York. Volume totaled 712,492
contracts yesterday, 2.7 percent above the average of the past
three months. Open interest was 1.37 million contracts.
For Related News and Information:
Top energy, oil stories: ETOP <GO> and OTOP <GO>
News on oil inventories: TNI OIL INV <GO>
News on oil markets: NI OILMARKET <GO>
Global energy statistics: ENST <GO>
--Editors: Joe Link, Dan Stets
To contact the reporter on this story:
Margot Habiby in Dallas at +1-214-954-9452
or mhabiby@bloomberg.net;
Mark Shenk in New York at +1-212-617-4331 or
mshenk1@bloomberg.net.
To contact the editor responsible for this story:
Dan Stets at +1-212-617-4403 or dstets@bloomberg.net.
