Oil nears $82 per barrel as dollar hits new low

Discussion in 'Wall St. News' started by S2007S, Oct 21, 2009.

  1. S2007S


    Another day another WORTHLESS dollar, consumer will be feeling the high costs of energy within months, no recovery for the economy with $100+ oil.

    Oil nears $82 per barrel as dollar hits new low

    By MARK WILLIAMS (AP) – 29 minutes ago

    Oil prices hit new highs for the year Wednesday just as the dollar fell to new lows against the euro, showing how much the weak U.S. currency has come to dominate energy markets.

    Benchmark crude for December delivery jumped more than 3 percent, or $2.71 to $81.83 a barrel on the New York Mercantile Exchange. It got as high as $80.70.

    Gasoline futures spiked 4 percent and Brent crude rose $2.48 to $79.72 on the ICE Futures exchange.

    The run-up in prices came within minutes of a government report showing that crude supplies in the United States are growing and that refiners are producing very little gasoline because consumers aren't using as much.

    "The dollar obviously is the overriding factor," PFGBest analyst Phil Flynn said. "It's not about demand I can tell you that."

    Refiners are shutting down plants, a combination of little demand and rising crude prices that wipe out profit margins.

    That can have real consequences at the pump. The government reported Wednesday that gasoline supplies fell by more than 2 million barrels last week.

    There is usually a lag between the direction of crude bought and sold on Nymex and the price that people pay for gasoline to fill up their cars.

    Crude began to rise on Oct. 7, when a barrel cost less than $70. Prices moved higher for eight days in a row, nearly reaching $80.

    Average retail gasoline prices started ticking higher one week later and a gallon has increased every day since, up about 12 cents in one week to $2.596 on Wednesday, according to auto club AAA, Wright Express and Oil Price Information Service.

    A gallon is still 29 cents less than last year at this time, when gas prices were in full retreat.

    There are concerns that spiking energy prices could stunt any economic recovery in Europe and the United States. Energy Secretary Steven Chu said Tuesday that crude prices at $80 per barrel right now is worrisome.

    Even though the amount of oil is well above normal for this time of year, it seems any movement in the dollar draws more money. Crude is priced in dollars, so it gets cheaper when the U.S. currency falls.

    One euro now fetches more than $1.50, the highest since August 2008.

    Demand for gasoline has risen over the past four weeks compared to the same period last year, but it's important to note that a pair of nasty hurricanes sent gas prices spiking in some parts of the country then and the crisis on Wall Street was in full bloom.

    Flynn said the combination of record low interest rates combined with government attempts to stimulate an economy weak from recession have helped drive oil prices higher than the otherwise would given the glut of crude. That, in turn, could prove to be a drag on the economy in the form of higher gasoline and heating oil costs this winter.

    "At what point are consumers going to be feeling the pain?" he asked.

    In other Nymex trading, heating oil rose 7.6 cents to $2.12 a gallon. Gasoline for November delivery rose 7.6 cents to $2.07 a gallon. Natural gas for November delivery rose 13 cents to $5.29 per 1,000 cubic feet.