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Crude rises to above 96d on supply dollar { October 2007 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=ah8JFGThyrPM&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=ah8JFGThyrPM&refer=home
Crude Rises to Above $96 on U.S. Supply Drop, Dollar (Correct)
By Grant Smith
(Correction adds dropped words `all the' in second paragraph.)
Nov. 1 (Bloomberg) -- Crude oil rose above $96 a barrel for the first time in New York after U.S. inventories unexpectedly fell to a two-year low and a lower dollar made OPEC members wary of increasing output.
Oil rose the most in two years yesterday after the Federal Reserve cut its benchmark interest rate for a second time in two months, prompting a drop in the dollar. The Organization of Petroleum Exporting Countries, whose members get dollars for almost all the oil they sell, has no need to raise production, ministers from Iran, Qatar and the United Arab Emirates said this week.
``The magnet of $100 is still strong,'' said Rob Laughlin, a senior broker at MF Global Ltd. in London. ``Prices are soaring after the data showed another decent crude stock draw, while with the weak dollar OPEC members are downplaying the need for more supplies.''
Crude oil for December delivery gained as much as $1.71, or 1.8 percent, to $96.24 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It traded at $95.67 at 11:13 a.m. London time.
U.S. crude stockpiles dropped 3.89 million barrels to 312.7 million barrels last week, the lowest since October 2005, according to the Department of Energy. A 400,000-barrel gain was expected in a Bloomberg News survey.
Declines in the dollar enhance the appeal of commodities priced in the U.S. currency as a hedging tool against inflation. At the same time, the reduction in revenue for oil producers gives an incentive to limit supplies and buoy the price.
U.S. Economy
The contract yesterday surged $4.15, or 4.6 percent, to settle at $94.53 barrel, the biggest jump in value since Sept. 19, 2005, when Hurricane Rita threatened Gulf of Mexico oil production.
U.S. gross domestic product grew at an annual rate of 3.9 percent in the third quarter, the most since the first three months of 2006. Faster economic growth will increase oil demand in the world's largest energy consumer.
The dollar sank to an all-time low of $1.4504 against the euro yesterday after the Federal Reserve's interest-rate cut.
``It was a massive drop in crude stocks, adding to a picture of tight supply,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. ``The falling dollar has given the extra push to prices.''
Crude is also strengthening on speculation that Turkey may escalate its campaign against Kurdish guerillas based in the north of Iraq, holder of the world's third-largest oil reserves, Saltvedt said.
`Political Turbulence'
``It you see an increase in political turbulence, and more speculators coming into the market, I think we could cross the $100 barrier,'' she said.
Brent crude oil for December settlement rose as much as $1.08, or 1.2 percent, to a record $91.71 a barrel on the London-based ICE Futures Europe exchange. It traded at $91.34 at 11:13 a.m. London time.
Inventories at Cushing, Oklahoma, the delivery point for New York futures, fell 17 percent, the report showed. Stockpiles dropped to 15.1 million barrels in the biggest decline since November 2004.
``The concern is that market conditions might tighten further over the coming months,'' said David Moore, a commodity strategist with Commonwealth Australia Bank Ltd. in Sydney. ``That's driven the oil price higher.''
Pemex resumed crude-oil exports at a rate of 800,000 barrels a day and will add another 300,000 by the end of today local time, Carlos Morales, chief of the company's exploration and production, said yesterday at a Mexico city press conference. Pemex previously said that 600,000 barrels a day of production had been halted.
``The shock of the data is understandable when you consider the news from Pemex that they shut in something like 1 million barrels a day, not 600,000,'' said Chris Mennis, owner of oil broker New Wave Energy LLC in Aptos, California. ``Most of that could have been going to the U.S.''
Last Updated: November 1, 2007 08:55 EDT
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