Crude oil prices up again as low dollar spurs buying

John Wilen

Associated Press Business Writer

Crude oil prices surged further into record terrain Sept. 20, breaching $83 a barrel as the weak dollar and some worrisome weather in the Gulf of Mexico spurred buying.

Gasoline futures jumped as well.

The weather system, which forecasters said might develop into a tropical depression, caused the temporary closure of about a quarter of the Gulf of Mexico’s daily oil production Sept. 20 as a precaution. That lent an extra boost to the oil market’s already strong record-breaking run, because traders view U.S. crude inventories as tight. The week of Sept. 10, crude inventories declined.

But the real drive behind the rally, many analysts said, is an influx of speculative “nontraditional” capital into energy commodities. And that inflow increases when the dollar falls.

Addison Armstrong, an analyst with TFS Energy Futures LLC, wrote in a research note that oil is rising due to weakness in the dollar. On Sept. 20, the dollar fell to yet another record low against the euro, and dropped to the same value as the Canadian dollar for the first time since November 1976.

A weak dollar supports oil prices by making futures cheaper for foreign investors, noted Antoine Halff, head of energy research at Fimat USA LLC.

It also prompts buying by domestic investors, who sense that demand for Nymex oil is rising overseas, said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.

Fourth record session

The October oil contract expired Sept. 20, and trading in expiring contracts is often volatile as traders move to square positions. Indeed, oil futures gyrated between gains and losses before surging in the afternoon above the $83 a barrel mark.

Brent crude rose 62 cents to settle at $79.09 a barrel on London’s ICE Futures exchange.

October gasoline rose 4.17 cents to settle at $2.1351 a gallon.

Heating oil futures rose 1.56 cent to settle at $2.2609 a gallon.

But natural gas fell 17.2 cents to settle at $6.008 per 1,000 cubic feet after the government reported that inventories grew by 63 billion cubic feet the week of Sept. 10, only slightly below consensus analyst expectations.

Natural gas prices have not been affected by National Hurricane Center forecasts that a tropical depression or storm could soon form in the Gulf.

“Investors seem to be more focused on the big storms that form out in the open Atlantic,” Ritterbusch said.

Some Gulf personnel evacuated

But the evacuations are likely temporary, given that oil and gas platforms are built to withstand smaller storms — even of tropical strength, analysts say.

Several oil and gas companies have evacuated nonessential personnel from Gulf installations in recent days as a precaution. But Ritterbusch said such moves are routine this time of year.

“They really don’t lose a significant amount of production when they do this,” he said.

At the pump, meanwhile, gas prices are still not reacting much to record oil prices. Overnight, the average national price of a gallon of gas rose 0.1 cent to $2.791, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the gasoline futures market, peaked at $3.227 a gallon in late May.

While oil inventories fell the week of Sept. 10, supporting prices, refinery activity fell and gasoline inventories grew. Many analysts believe gasoline prices are well past their peak for the year. Despite falling inventories, demand is also falling now that peak summer driving season has ended, analysts say.

Oil’s rise in recent sessions has many analysts scratching their heads.

“We believe that global demand is significantly weaker than current record high prices would suggest,” Ritterbusch said. “I’m just having an incredibly difficult time coming up with fundamental arguments to support these prices.”

But the weak dollar and speculative investors could continue to send oil prices to new records for some time to come, analysts say.

Alaskans get $1,654 PFD checks

The dividend checks are derived from the state’s oil royalty investment program and distributed each year to eligible residents — just for living in Alaska one full calendar year.

“Oh, baby!” Palin said as she announced this year’s dividend at the Valdez Convention and Civic Center.

Slightly more than 600,000 men, women and children in 248 communities will receive the dividend this year, according to the Revenue Department. The state’s estimated population is just over 670,000 people.

Anyone who has lived in Alaska for a full calendar year can apply for the money — including children.

Of those receiving checks this year, about 41 percent — or 244,695 of the state’s residents — were born in Alaska.

—The Associated Press