Oil climbs a second day as dollar drop boosts hedging appeal
Oil gained for a second day as the dollar slumped to a 15-year low against the yen, drawing investors to use dollar-priced commodities as a hedge against inflation.
Crude futures advanced as much as 1.6pc as a pledge by the Group of 20 nations to avoid “competitive devaluation” in currencies heightened speculation that the US Federal Reserve will announce another round of bond purchases next week.
Richard, a weather system bearing down on the Gulf of Mexico, weakened from hurricane-status to become a tropical storm, the US National Hurricane Centre said.
“Renewed weakness in the dollar, combined with China-led demand for raw materials, is propelling the crude market higher again today,” said Christopher Bellew, senior broker at Bache Commodities in London. “Prices would be even higher if Saudi Arabia were not feeding extra barrels to the market.”
Oil for December delivery rose as much as $1.30 to $82.99 a barrel on the New York Mercantile Exchange, and was at $82.72 at 10:29am.
Brent crude for December settlement was up 93 cents at $83.89 a barrel on the ICE Futures Europe exchange in London.
G20 officials, who ended talks in South Korea on October 23, agreed to let markets set foreign-exchange values. The dollar fell as much as 0.9pc to $1.4080 against the euro.
September output data for Saudi Arabia compiled by Bloomberg shows the nation to be supplying about 2 million barrels a day in excess of the quota allocated by the Organisation of Petroleum Exporting Countries.
Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended October 19, the Commodity Futures Trading Commission said last week.
Managed money bets that prices will rise, in futures and options combined, outnumbered short positions by 163,641 futures, the Washington-based regulator said in its weekly Commitments of Traders report. Net long positions fell by 15,097 contracts, or 8.5pc, from a week earlier.
Crude may decline this week, according to a Bloomberg survey of 30 analysts. Fourteen of 30 respondents, or 47pc, forecast prices will fall through October 29. Eleven economists predicted prices will be little changed and five estimated an increase.
“What’s really driving up the oil price today is the dollar,” Victor Shum, a senior principal at consultants Purvin & Gertz Inc in Singapore, said.
“There are other factors that are supportive, like the ongoing strikes in France. It looks like France now will have to import fuels.”
Industrial action across France over plans by President Nicolas Sarkozy to raise the age for retirement and pensions have caused nine of 11 refineries to shut and the other two to run at reduced rates, disrupting shipments to foreign markets.
The stoppages, which began at the port of Marseille on September 27, may have cut petroleum production by about 300,000 barrels a day, according to Credit Agricole CIB.
One quarter of France’s service stations faced supply disruptions and fuel shortages will worsen today, according to union officials.