Oil Rises to Record as Falling Dollar Prompts Commodity Buying

Bloomberg: Oil Rises to Record as Falling Dollar Prompts Commodity Buying

By Christian Schmollinger

April 15 (Bloomberg) — Crude oil rose to a record on speculation the dollar will extend declines and China will report economic growth of more than 10 percent in the first quarter.

Oil for May delivery climbed as much as 72 cents, or 0.6 percent, to $112.48 a barrel on the New York Mercantile Exchange, the highest since futures began trading in 1983. Crude also gained after Mexico shut its fourth export terminal because of bad weather. China said today diesel imports surged 49 percent in March.

“Investors are selling dollars and buying oil and other commodities,” said Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore. China’s growing consumption of oil “really counterbalances the decline in the U.S.,” he said.

Crude traded at $112.07 a barrel, up 31 cents, at 2:54 p.m. in Singapore. Prices have gained 76 percent from a year earlier. Futures yesterday rose $1.62, or 1.5 percent, to settle at $111.76 a barrel, the highest close.

Brent crude for May settlement rose as much as 61 cents, or 0.6 percent, to $110.45 a barrel, an all-time intraday high, on London’s ICE Futures Europe exchange. It was at $110.30 at 2:54 p.m. Singapore time. The contract yesterday gained $1.09, or 1 percent, to close at a record $109.84.

Crude oil today reached an inflation-adjusted $49.36 a barrel, the highest ever, according to Bloomberg calculations.

BP Stake

China bought a stake in BP Plc, the U.K.’s biggest company, in its second investment in a European oil company as the nation seeks to secure resources and boost returns. A sovereign fund purchased just less than 1 percent of BP, with the stake worth about 1 billion pounds ($1.97 billion), the Daily Telegraph said.

The world’s second-largest energy consumer’s diesel imports rose to 490,000 metric tons last month from 330,000 tons in February, the Customs General Administration of China said in an e-mailed statement today.

The jump in demand coincides with the need for fuels for tractors during the spring planting season. The country’s crude oil imports surged 25 percent in March, the Customs Administration said April 11.

“Demand in the major Western countries is becoming less,” said Tetsu Emori, fund manager with Astmax Futures Ltd. in Tokyo. “But the developing countries such as China, India and the Middle East are increasing their consumption.”

Dollar Weakens

Oil has risen 37 percent and the dollar has dropped 12 percent against the euro since the Federal Reserve began lowering interest rates on Sept. 18.

“As the dollar weakens then the oil price becomes cheaper in terms of the euro and that encourages buying, so there may be some people who view oil as a hedge against dollar weakness,” said David Moore, the commodity strategist at Commonwealth Bank in Sydney.

The likelihood of the Fed cutting its target rate for overnight lending between banks by a half-point to 1.75 percent on April 30 rose to 52 percent from 36 percent a week ago, futures contracts on the Chicago Board of Trade show.

Petroleos Mexicanos, the third-largest supplier of crude to the U.S., shut its crude oil export terminal on the Pacific coast yesterday, the fourth terminal to close because of bad weather since April 13.

The terminal at the port of Salina Cruz closed today, Mexico’s Merchant Marine reported in a weather bulletin posted on its Web site. The three Gulf of Mexico terminals at the ports of Pajaritos, Dos Bocas and Cayo Arcas are still closed.

Royal Dutch Shell Plc restored the flow of oil today through the 1.1 million barrel-a-day Capline system. Capline runs from the Gulf of Mexico to the Midwest. Refineries served by the pipeline include BP’s 420,000 barrel-a-day plant in Whiting, Indiana, and Marathon Oil Co.’s 239,000 barrel-a-day facility at Catlettsburg, Kentucky.

Eni Sabotage

Eni SpA’s Nigerian venture halted production at some wells following explosions near the Beniboye area in the Delta state, the company said. Oil wells in Nigeria caught fire April 12, causing about 5,000 barrels a day in lost production, because of “sabotage,” with no injuries reported, the Rome-based company said today in a statement posted on its Web site.

U.S. crude-oil supplies probably gained last week amid speculation imports rose, a Bloomberg News survey indicated.

Oil supplies advanced 1.3 million barrels in the week ended April 11 from 316 million barrels, according to the median of responses by 10 analysts before the Energy Department report.

Gasoline inventories probably dropped 1.8 million barrels from 221.3 million barrels the week before, according to the median of responses. Supplies of distillate fuels, a category that includes heating oil and diesel, fell 1.6 million barrels from 106 million the prior week.

To contact the reporter on this story: Christian Schmollinger in Singapore at [email protected].

Last Updated: April 15, 2008 03:02 EDT

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