Benchmark oil for December delivery was up 30 cents to
$88.11 a barrel mid-afternoon Thursday in Europe after rising as high as $88.63
earlier in the session during electronic trading on the New York Mercantile
Exchange. On Wednesday, crude prices added $1.09 to settle to $87.81 on
Wednesday.
Analysts say oil could easily reach the $90 mark in the next
few days, with $94-$95 being the next big milestone. That spells more financial
pain for businesses, consumers and drivers, who were at least able to find some
comfort in cheaper energy costs over the past two years of recession.
“We still have enough oil to make it through the winter and
into the next economic expansion. But, the surpluses are not as large and
demand is making the kind of strides forward that suggest the economy is
improving faster than we dared imagine,” said energy research company Cameron
Hanover.
“If the economy starts to really improve, then prices are
likely to gain an extra boost.”
Crude prices are following gold, copper, cotton and other
commodities, which are rising to record highs as investors seek safety after
the Federal Reserve’s decision to pour $600 billion into a bond-buying program
to stimulate the US economy. The Fed’s program will unleash more dollars on the
market, effectively devaluing the dollar.
Commodities, which are priced in dollars, tends to go up if
the dollar weakens because it makes them cheaper for overseas portfolio
managers who have euros, pounds or yen to spend.
Recent US economic data reports have also been upbeat, which
is also giving oil a boost since they suggest more consumption ahead.
US commercial crude inventories fell by 3.3 million barrels
to 364.9 million barrels for the week ending Nov. 5, the Energy Department said
Wednesday.
The government also said gasoline inventories declined by
1.9 million barrels to 210.3 million barrels while demand over the past four weeks
was up slightly, averaging 9.1 million barrels a day. That’s an increase of 1.8
percent from the year earlier period.
The amount of oil in storage remains above the average for
this time of year, yet the oil price is now at its highest level since October
2008, when the global financial crisis was taking hold in the wake of the
bankruptcy of U.S investment bank Lehman Brothers. Oil prices have risen about
11 percent this year, while crude supplies have increased by 11.5 percent.
Oil was higher Wednesday even though the dollar was stronger
as traders concluded the inventory decline was a sign of an improving economy.
On Thursday the dollar fell against the euro and rose versus the yen.
“Even the firmer US dollar is clearly no obstacle to higher
prices at present,” Commerzbank said in a research note. “The inventory report
of the US Department of Energy was one factor driving prices, revealing a
stronger-than-expected reduction of stocks in all categories.”
Commerzbank also said oil “gained additional impetus from
the economic data from China.”
Authorities in China said yesterday that factory output and
retail sales both rose at double-digit rates in October over a year earlier.
In other Nymex trading in December contracts, heating oil
fell 2 cents to $2.44 a gallon and gasoline was down 0.4 cents to $2.23 a
gallon. Natural gas was down 2 cents at $4.03 per 1,000 cubic feet.
In London, Brent crude climbed 2 cents to $88.98 a barrel on
the ICE Futures exchange.
