Oil nears five-month high as commodities rally

LONDON - Oil rose towards five-month highs above $84 per barrel on Thursday in a broad-based rally of commodities fuelled by a slump in the dollar and news of a surprise drop in U.S. stockpiles.

By (Reuters)

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Published: Thu 14 Oct 2010, 5:37 PM

Last updated: Mon 6 Apr 2015, 11:42 AM

Ministers from the Organization of the Petroleum Exporting Countries decided in Vienna to keep oil production unchanged, sources said, with one delegate saying the 12 producer countries were “100 percent” agreed. The meeting was continuing and a formal decision had yet to be announced.

OPEC is happy with oil prices as they are and wants to do nothing to disrupt the supply-demand balance in the market.

U.S. crude for November climbed $1.11 to a high of $84.12 a barrel, before slipping back to trade around $83.45 by 1050 GMT. Last week, it hit a peak of $84.43, the highest since May 4, while ICE Brent added 80 cents to $85.44.

The dollar fell to its lowest in 10 months against a basket of currencies, giving up more than 0.7 percent on the day, making oil imports cheaper for emerging economies, while the euro rose to an eight-month high.

“Today’s move higher is all about the dollar,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. “Investors believe that a weak dollar is good for commodities, so they buy. It is a self-fulfilling prophesy.”

Christopher Bellew, oil broker at Bache Commodities, said Chinese demand for oil and the coming northern winter were supportive but the general rise in commodities was paramount.

“I think that right now the oil price is so strong because of the weak dollar and strong prices across all commodities as an asset class,” Bellew said.


Expectations of a fresh round of expansionary monetary policy, or quantitative easing, by the U.S. Federal Reserve and other central banks is helping fuel a rise in commodities.

Improving fundamentals in the oil market, including falling inventories in the United States, rebounding OECD demand and soaring imports in China, are also encouraging buying of crude oil ahead of the northern hemisphere winter heating season.

U.S. crude inventories fell unexpectedly last week, partly because of the closure of the Houston Ship Channel, shedding 4 million barrels compared to an expected increase of 1.1 million, the American Petroleum Institute (API) said on Wednesday.

Gasoline and distillate stocks, including heating oil and diesel, also fell by 1.9 million barrels and 254,000 barrels, respectively, versus forecasts from a Reuters survey for drops of 1 million and 1.1 million barrels.

Government data on U.S. stocks and demand from the Energy Information Administration is due at 1500 GMT.

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