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Oil Pulls Out Another Rebound
June 12, 2008 3:56 p.m.
NEW YORK – Crude-oil futures left behind a day of steep losses to close higher Thursday, led up by gasoline.
Light, sweet crude for July delivery settled up 36 cents, or 0.3%, at $136.74 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled $1.07 higher at $136.09 a barrel.
Crude dwelled in negative territory for most of the session, hurt by a stronger dollar, and at one point dropped as low as $131.55 a barrel. Late in the day it clawed back, repeating its volatile moves of recent days.
Crude is now up 42% year-to-date in a rally that last week took prices to records above $139.
“Any good price dip will be met with open arms by waiting buyers,” said Matt Zeman, head of trading at LaSalle Futures Group.
Ongoing risks of supply bottlenecks girded buyers. In Nigeria, talks between oil workers and Chevron Corp. “are not going very well” ahead of a looming strike, the workers’ union told Bloomberg News. The union gave the company until June 18 to resolve safety and staffing issues, Bloomberg reported.
The dollar rose and then stayed steady against other currencies Thursday following U.S. retail sales data that came in stronger than expected.
Starting last summer, oil prices and the dollar’s relative value seemed to work in tandem, with moves down by the greenback accompanied by new record highs for crude. A weaker dollar allows buyers using stronger foreign currencies to bid up prices. In addition, a weak dollar is considered to be a harbinger of inflation as imports to the U.S. become more expensive, leading many investors to turn to oil as a hedge against broad-based price rises.
But as seen Thursday, the reverse doesn’t always hold true.
“Traders are looking at underlying fundamentals of crude, and they are still relatively very tight, and therefore they don’t react to the gyration in the currency markets as they may have done before,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York.
World oil demand is faltering under the strain of high prices, but continues to grow.
“Demand is not drying up in terms of people not driving,” said Scott Meyers, senior analyst at Pioneer Futures in New York. “That’s not happening.”
Gasoline moved climbed higher than crude, with benchmark reformulated gasoline blendstock, or RBOB, futures settling 6.02 cents, or 1.7%, higher at $3.5260 a gallon. In U.S. data released Wednesday, gasoline demand rose 3.1% last week from the prior week, though U.S. gasoline demand remains down 1% year to date.
“People are seeing a little less weakness than anticipated” in U.S. gasoline demand, said Jonathan Benjamin, senior market analyst at brokerage New Wave Energy in Aptos, Calif.
July heating oil declined 3.21 cents, or 0.8%, to settle at$3.9427 a gallon
