Oil rebounds on weak dollar

13th January 2011, Comments 0 comments

World oil prices climbed close to another two-year peak on Thursday, as the euro strengthened against the dollar and traders absorbed news of a shock increase in US jobless claims.

Brent North Sea crude for delivery in February climbed as high as $98.67 per barrel in afternoon deals, after peaking on Wednesday at $98.85 -- which was the highest level since early October 2008.

The contract later stood at $98.45, up 33 cents from the closing level on Wednesday.

Elsewhere on Thursday, New York's main contract, light sweet crude for February, added 36 cents to $92.22 per barrel.

The market's push higher is "all about the euro", VTB Capital analyst Andrey Kryuchenkov told AFP.

The European single currency jumped above 1.33 dollars on Thursday, thanks largely to successful Italian and Spanish bond auctions, supportive European Central Bank comments and poor US data.

A weaker greenback boosts dollar-priced crude oil, which becomes cheaper for buyers using stronger currencies. In turn, that tends to stimulate demand and push prices higher.

Oil had rallied for a third straight day on Wednesday, climbing in London to more than two-year highs, as the key Alaskan pipeline remained shut following a weekend leak.

The market also gained support from data showing crude oil stockpiles fell more than expected in the United States, the world's biggest oil-consuming nation.

Some traders believe that oil could soon strike 100 dollars per barrel for the first time since October 2008.

"100 dollars could yet become a self-fulfilling prophecy with attention back on the broader market and positive momentum spilling over," added Kryuchenkov.

"The euro is the driver here despite the restart to the pipeline, even though it initially triggered the latest upswing.

"Sure, US crude inventory draws over the past weeks as well as colder than usual weather were supportive, but spare capacity is still plentiful with OPEC supplying excessive amounts."

Prices also pushed higher on Wednesday after the US Department of Energy reported American crude stockpiles sank 2.2 million barrels last week. The decline was sharper than expected, suggesting stronger demand.

The 800-mile (1,300-kilometer) Trans-Alaska Pipeline, which carries about 12 percent of US production, was meanwhile shut down after a leak was discovered Saturday.

Alyeska, the pipeline's operator, said Tuesday it would restart the pipeline temporarily to prevent cold weather damage to the equipment.

Stock markets have risen sharply this week as worries over the eurozone debt crisis have eased and US fourth quarter corporate results have proved supportive overall.

© 2011 AFP

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