30/04/2011
Oil lifted by weak dollar, to post eight-monthly gain
A motorist fills his gas tank at a fuel station in the Seattle suburb of Bellevue, Wash
Oil prices pushed higher on Friday, on pace to post its eighth consecutive monthly rise, lifted by the weak dollar and turmoil in North Africa and the Middle East that offset concerns about slowing US economic growth and the threat to demand from high prices.
On the last trading day of April, both Brent and US crude were heading for an eighth consecutive month of gains. The US string would be the longest run of monthly increases since 1983 when the light sweet crude contract was introduced on the New York Mercantile Exchange, according to Reuters data.
Traders also eyed US front-month May gasoline and heating oil futures that expire at the end of Friday’s session.
Both U.S and Brent crude bounced from early dips after euro zone data showed the inflation rate rose further above the European Central Bank’s target in April, helping push thedollar index against a basket of major currencies to a three-year low.
Brent crude for June rose 61 cents to $125.63 a barrel by 1624 GMT. Brent’s 2011 peak of $127.02 was reached on April 11.
US crude for June rose 54 cents to $113.40.
US crude reached $113.97 on Thursday, the highest intraday price since prices reached $130 on Sept. 22, 2008.
“Oil is reacting to the dollar. The dollar index looked like it was trying to find at least a temporary base around the 73 area. Oil is waiting for something new to push it higher,“
said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.
Higher interest rates in Europe compared to the US have undermined support for the US dollar, pushing up the euro by 11 percent so far this year.
Thursday’s report that growth in the US gross domestic product slowed more than expected in the first quarter reinforced the perception that the US central bank willcontinue with its loose monetary policy.
“Yesterday’s three-year lows in the dollar index following the mid-week Fed statement strongly suggests a market dynamic that is not yet ready to reverse,” Jim Ritterbusch, presidentat Ritterbusch & Associates in Galena, Illinois, said in a note.
“Consequently, oil will continue to be valued as an asset class or inflation hedge along with other commodities such as the gold market.”
Crude oil trading volumes remained tepid, dampened by a holiday in the United Kingdom.
Volatility and uncertainty amid the pan-Arab protests and Libya’s conflict have tempered trading, indicated by the nearly 130,000-lot deficit of the US 30-day average volume to the250-day average, according to Reuters data.
Libya’s conflict spilled beyond its borders as forces loyal to leader Muammar Qaddaffi attacked the Tunisian town of Dehiba, near the Libyan border..
Morocco, which borders oil and gas producer and OPEC-member Algeria, said a bomb that killed at least 14 people on Thursday was a terrorist act.
In the Middle East, tensions escalated in Syria and tens of thousands rallied across the country demanding political freedoms.
Oil’s price rise could be tempered if evidence that high prices are eroding demand starts to confirm forecasters’ fears that they are slowing consumption and the global economy.
US consumer spending rose as households stretched to cover the higher cost for food and gasoline as inflation posted its biggest year-on-year rise in 10 months.
Separate reports showed US Midwest factory activity and that while US consumer sentiment rose as a sharp increase in gasoline prices was viewed as being temporary, consumers stillanticipated additional price increases.
Complaints about high prices were the most frequent since 2008 and half of all households said their finances had worsened, according to the survey.
