Last Update 20:59
Tuesday, 10 December 2019

Oil holds at 2-year highs on weak dollar, cold spell

Oil extended its rally into a fourth straight session on Monday to a 25-month high as the dollar continued to languish.

Reuters, Monday 6 Dec 2010
Oil 1
Oil prices reached the peak in 25 months.(Photo: Reuters)
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Views: 687

The market will take trading cues from economic indicators later this week, with the Institute for Supply Management releasing its semi-annual economic forecast for the U.S. manufacturing and services sectors on Tuesday.

Weekly U.S. mortgage data on Wednesday, and jobless claims on Thursday, will also be closely watched.

"If the U.S. dollar comes under more fire, that's going to push crude prices higher," said Peter McGuire, an independent market strategist based in Sydney. "I wouldn't be surprised if the $91 and $92 levels are taken out later in the week."

U.S. crude for January was up 17 cents at $89.36 a barrel by 0610 GMT, off an earlier high of $89.60, its highest intraday since October 9, 2008. The contract settled at $89.19 on Friday, the highest close since October 7, 2008.

ICE Brent for January gained 18 cents to $91.60, after settling at $91.80 on Friday, just shy of a two-year high of $91.85 reached earlier.

Data on Friday showing the U.S. economy added fewer jobs than expected in November, driving the jobless rate to a seven-month peak, which weighed on the greenback and boosted crude.

Putting the dollar further on the defensive, Fed Chairman Ben Bernanke said in a television program later that the central bank could end up buying more than the $600 billion in U.S. government bonds it has committed to purchase if the economy failed to respond or unemployment stayed too high.

Oil and dollar-denominated commodities often move inversely to the dollar. A weaker dollar typically lifts oil prices as it lowers the value of greenbacks paid to producers, while making it less expensive for oil consumers using other currencies.

The dollar on Monday pulled back from a three-week low against the yen and two-week lows against the euro set on Friday, helped by short covering. It rose 0.5 percent to 82.93 yen, climbing off Friday's three-week low of 82.52 yen, gaining 0.4 percent on the index.

Also offering price support were plunging temperatures in Europe and colder weather in parts of the United States, which spurred demand for heating oil and other heating fuels.

The U.S. National Weather Service, in its eight to 14-day outlook issued on Thursday, called for below-normal temperatures for much of the eastern half of the country, which includes the world's largest regional market for heating oil.

The outlook remains bullish for next year, with at least five banks raising their price outlook due to tighter supplies.

ING analysts forecast that oil may trade in a higher range between $80 and $100 a barrel going forward, while JP Morgan analysts predicted NYMEX crude was likely to average $93 a barrel next year.

Goldman Sachs kept its call for $100 a barrel average NYMEX oil prices next year, and lifted its crude price outlook to an average of $110 a barrel in 2012.

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