Oil edges above $75 supported by weak dollar
Singapore, September 22, 2010
Oil got support from a weaker dollar on Wednesday to trade slightly above $75, shrugging off an industry report showing surprise gains in US inventories.
The outlook for oil demand remained sluggish after the Federal Reserve on Tuesday stopped short of laying out a timetable to provide more stimulus to the United States economy, following a one-day meeting to set policy.
But confirmation by the Fed that overnight interest rates will remain near zero and expectations the US central bank would print more dollars sent the greenback to a seven-week low against the euro. A weaker dollar means improved oil-purchasing power for holders of other currencies.
US crude for November, the front-month contract after October went off the board on Tuesday, rose 12 cents to $75.09 by 0230 GMT, having slipped as much as 32 cents earlier.
ICE Brent for November shed 4 cents to $78.38.
The weaker dollar also spurred speculation that Japan might intervene to curb yen gains for the second time since 2004.
"Towards the next two weeks, oil prices will be supported by the weak dollar," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.
"Inventory data has not had so much of an impact on this market. Generally speaking, crude oil has been moving around $75 for a long time, so data showing an inventory increase cannot push prices out of this range."
US crude inventories rose by 2.2 million barrels last week, against expectations for a 1.9-million barrel drop, as imports increased despite a key Enbridge pipeline outage, the American Petroleum Institute (API) said on Tuesday.
Gasoline stocks rose by 2.4 million barrels, the API said, against analysts' forecast for a 300,000 barrel decline.
Distillates including heating oil and diesel rose by 2.5 million barrels, versus expectations of a 200,000 barrel gain.
Government statistics on inventories and demand will follow from the US Energy Information Administration on Wednesday at 1430 GMT.
In equity markets, Japan's Nikkei average slipped 0.5 per cent on Wednesday, hurt as the yen edged higher after the Fed's latest statement intensified speculation that it would take more quantitative easing steps later this year.
On Tuesday, gold prices hit new highs on inflation fears after the Federal Reserve inched closer to boosting money supply to spur the struggling US economy, a potential move that led stocks' rise to fade.
Forecasters are closely monitoring a tropical wave in the southeastern Caribbean that is producing showers and thunderstorms over much of the Windward Islands as it moves westward. In a couple of days, it is expected to become a tropical depression -- one step below tropical storm strength. – Reuters