Oil Rises More Than $3 on U.S.-Russia Tensions, Dollar Weakness
By Mark Shenk
Aug. 21 (Bloomberg) -- Crude oil advanced more than $3 on speculation that rising tensions between the U.S. and Russia may disrupt the flow of oil, and as a weaker dollar bolstered the appeal of commodities.
Russia, which vies with Saudi Arabia as the world's biggest oil producer, criticized U.S. plans for a missile shield in Poland. Russia's invasion of Georgia has cut some export routes for Caspian Sea crude. Oil and gold climbed as the dollar fell to the lowest against the euro in a week.
``The fall of the dollar is sending a huge investor flow into commodities,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``The tensions between Russia and the West were supposed to be simmering down but they are now ratcheting up because of Poland's agreement with the U.S.''
Crude oil for October delivery rose $3.72, or 3.2 percent, to $119.28 a barrel at 9:10 a.m. on the New York Mercantile Exchange. Futures are down 19 percent from a record $147.27 reached on July 11. Prices are up 71 percent from a year ago.
Brent crude oil for October settlement rose $3.48, or 3 percent, to $117.84 a barrel on London's ICE Futures Europe exchange.
``The dollar has been the big driver of both the rally and the pullback,'' said Kevin Kerr, president of Kerr Trading International in Wilton, Connecticut.
The dollar fell 0.3 percent to $1.4796 per euro, from $1.4747, and touched $1.4833, the weakest since Aug. 14.
``The hope was that Russia's fields would be developed and the barrels made available,'' Kerr said. ``If you are a multinational, you are already afraid of nationalization of your assets. Now, with the recent problems between Russia and its neighbors, nobody is going to invest there.''
Foreign Control
TNK-BP, a 50-50 venture between BP Plc and a group of billionaires known collectively as AAR, is embroiled in a dispute over strategy and management. BP, which relies on the company for almost a quarter of its output, is struggling to maintain control amid pressure on foreign employees.
U.S. gasoline supplies fell 6.2 million barrels last week, the U.S. Energy Department said in a report yesterday, more than double analysts' predictions. Crude-oil stockpiles rose 9.39 million barrels to 305.9 million barrels, the biggest gain since March 2001, the report showed. Stockpiles fell the previous week when Tropical Storm Edouard hit Texas.
Fuel Production
Refineries operated at 85.7 percent of capacity in the week ended Aug. 15, down 0.2 percentage point from the week before and the lowest since the week ended May 2, the report showed.
``The market shrugged off the big crude build because they attributed it to delayed imports that couldn't arrive during the week of Edouard,'' McGillian said. ``More attention was paid to the drop in gasoline stocks and refinery runs. If refiners continue to operate at this level we won't be able to build product inventories.''
Gasoline for September delivery rose 8.78 cents, or 3 percent, to $2.9981 a gallon in New York. Futures reached a record $3.631 a gallon on July 11.
Pump prices haven't increased since July 19, according to the AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 1.5 cents to $3.702 a gallon, the AAA said today on its Web site. Prices reached a record $4.114 a gallon on July 17.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
Last Updated: August 21, 2008 09:41 EDT
