Royal Dutch Shell Plc  .com Rotating Header Image

Crude Oil Rises as Dollar Drops, OPEC Signals Resolve to Cut



By Grant Smith

Feb. 23 (Bloomberg) — Crude oil rose as the dollar slipped the most in a month against the euro, heightening the appeal of commodities as an inflation hedge, and as OPEC signaled its resolve the trim output.

The Organization of Petroleum Exporting Countries may decide to make another production cut should oil prices continue to fall, Chakib Khelil, the Algerian oil minister and former OPEC president, said yesterday. The U.S. currency declined for a third day versus the euro, the longest losing streak this year.

“OPEC is under strong pressure to cut again in order to stop a worldwide build-up in inventories,” said Gerrit Zambo, an oil trader at BayernLB in Munich. “The dollar-oil correlation is still there. The stronger euro we see today is going hand-in-hand with higher oil prices.”

Crude oil for April delivery gained as much as 77 cents, or 2 percent to $40.80 barrel, in electronic trading on the New York Mercantile Exchange. The contract traded for $40.55 at 9:36 a.m. London time.

The dollar fell on speculation the U.S. government may increase its stake and end up holding as much as 40 percent of Citigroup’s common stock, the Wall Street Journal reported. A decline in the U.S. currency typically prompts investors to buy commodities as an inflation hedge.

The dollar dropped to $1.2851 per euro as of 9:31 a.m. in London from $1.2826 late in New York on Feb. 20. It earlier fell as much as 1.8 percent, the steepest decline since Jan. 26.

Iran, Venezuela

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15. The group agreed Dec. 17 on output constraints that would reduce supplies in January by 2.2 million barrels a day from December levels. That followed pledges to remove 2 million barrels a day in the fourth quarter of last year.

“We are looking at oil consumption this year down by more than a million barrels a day,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “That certainly is significant and puts pressure on OPEC to try and balance against it.”

Brent crude oil for April settlement rose as much as 69 cents, or 1.7 percent, to $42.58 a barrel on London’s ICE Futures Europe exchange and traded at $42.34, up 45 cents, at 9:36 a.m. London time.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended Feb. 17, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 45,016 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 28,438 contracts, or 172 percent, from a week earlier.

To contact the reporters on this story: Grant Smith in London at[email protected]

Last Updated: February 23, 2009 04:37 EST

BLOOMBERG ARTICLE and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Crude Oil Rises as Dollar Drops, OPEC Signals Resolve to Cut”

Leave a Comment

%d bloggers like this: