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THE WALL STREET JOURNAL: Crude clears $110 for first time despite report of rising supplies

ASSOCIATED PRESS
March 13, 2008

NEW YORK — Crude oil surpassed $110 for the first time as it gained for the third straight day.

Investors shrugged off a U.S. Energy Department report that crude-oil and gasoline supplies jumped last week.

Light, sweet crude for April delivery rose $1.17 to settle at $109.92 a barrel on the New York Mercantile Exchange after earlier rising to a new trading record of $110.20.

The dollar weakened throughout the day yesterday, setting a number of new low marks against the euro and attracting new buyers to the oil market. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak. Many analysts believe the dollar’s decline is the reason crude futures have surged to new records in 11 of the past 12 sessions, despite the fact that crude supplies have risen 10% since early January.

Oil prices initially fell after the Energy Department’s Energy Information Administration said crude supplies jumped by 6.2 million barrels last week, more than three times the 1.6-million-barrel forecast of analysts surveyed by Dow Jones Newswires. But buyers quickly returned to the market.

“I tend to think that every [price] dip looks like a buying opportunity right now,” said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos.

The EIA also reported that gasoline supplies rose by 1.7 million barrels last week, well above the expected 300,000-barrel increase, and distillate supplies dropped by 1.2 million barrels, less than the expected two-million-barrel decline.

It was the eighth increase in crude supplies in nine weeks, putting oil inventories back on a growth track after a one-week decline. Meanwhile, forecasters including the Energy Department, the International Energy Agency and the Organization of Petroleum Exporting Countries have consistently reduced their demand growth predictions for this year.

Yesterday’s EIA report offered more evidence demand is falling: Gasoline consumption fell 0.7% last week compared with the same week last year.

http://online.wsj.com/article/SB120535728271031477.html

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