Tulsa World: Dollar's dip boosts oil, gasoline futures

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Dollar's dip boosts oil, gasoline futures
U.S. currency tumbles to a 15-month low while oil supplies remain plentiful.

By Staff and Wire Reports
Published: 11/26/2009 2:32 AM
Last Modified: 11/26/2009 5:22 AM

The dollar's sway over energy markets was on full display Wednesday, with oil and gasoline futures rising sharply as the U.S. currency tumbled to 15-month lows.

Crude prices had been trading relatively flat, even after the government reported supplies grew by 1 million barrels last week.

At midday, however, the dollar began to slide against the euro, and crude prices jumped along with gasoline and other crude-based fuels.

Natural gas, which each week sets records for the total amount held in storage, jumped more than 8 percent.

Energy experts were at a loss to explain why natural gas prices rose. Major industrial customers have slashed power usage during the economic downturn.

Orders for big-ticket factory goods fell unexpectedly in October, according to the Commerce Department, the first decline since August.

In addition, this is the time of year when natural gas levels are falling because people are turning on the heat in their homes. That's not happening as much because it's been a very mild winter so far.

That's led to even more supply in storage.

"The last time we saw an injection this late in the year occurred back in 2001," said analyst Stephen Schork.

Also, another 1 million barrels of crude and an equal amount of gasoline went into storage last week, the government reported. Futures contracts for both rose more than 1 percent Wednesday.

Crude's move higher demonstrated how much the dollar has come to affect energy prices.

If an investor holds euros or other currencies that strengthen against the dollar, he can get more oil for less because it's bought and sold largely in dollars.

Benchmark crude for January delivery rose $1.94 to settle at $77.96 on the New York Mercantile Exchange, despite growing supply.

Retail gasoline prices that have fallen for a week will likely stabilize and could rise a bit if crude prices continue to move upward.

The average price for a gallon fell less than a penny to $2.636 overnight, according to auto club AAA, Wright Express and Oil Price Information Service. That's still a few cents cheaper than a month ago.

In Tulsa, some retailers dropped the price for gasoline a few cents Wednesday to $2.34. The local pump price is 13 cents a gallon less than a month ago, but is 72 cents higher than a year ago.

Despite that higher fuel cost, travel by road for Thanksgiving is expected to be up 1.4 percent, according to travel club AAA. Travel by airplane, meanwhile is forecast down almost 7 percent.

"This is a trend that's been in place for a few years," AAA-Oklahoma spokesman Chuck Mai said in a telephone interview. 'It's like people toss a coin in the air, and heads is drive and tails is fly. During this decade we've been seeing more heads, as air travel is down 62 percent since 2000."

Right now, supplies for fuel are ample and demand remains modest. But, things can change quickly, he noted.

"The recent war games conducted by Iran illustrate the precarious nature of global markets," Mai said. Iran scheduled five days of drills aimed at protecting its nuclear facilities from attack.

"There's no impact on oil supplies from these war games, but they do remind us that the potential for unrest is there," Mai said.

Wall Street traders took note of the drills and also kept their eyes on the falling dollar. The decline in the dollar keeps investors coming back to buy crude and gasoline futures, analysts said.

On Wednesday, someone holding a euro could trade it in for more than $1.51 to buy crude.

"Loose monetary policy and a weaker dollar should put upward pressure on crude oil prices next year," analysts with Bank of America Merrill Lynch said in a report.

In other Nymex trading, gasoline for December delivery jumped 5.86 cents to settle at $1.9976 a gallon.

Heating oil gained about 4 cents to settle at $1.9901 a gallon. Natural gas for December delivery rose nearly 40 cents to $5.163 per 1,000 cubic feet.

The Tulsa World Business staff contributed to this story by The Associated Press.

By Staff and Wire Reports

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