“Some of the uncertainty about the end effects of what the Fed has done have weakened the dollar, and people look to commodities as a hedge against the falling dollar,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut.
Nauman Barakat, of Macquarie, said traders were being pulled in opposing directions, creating swings in crude prices. “The market is having great difficulty knowing which thing to focus on – it’s the weaker dollar versus continuing concerns over the financial meltdown,” Mr Barakat said.
Oil for October delivery rose 44 cents, or 0.5 percent, to $98.32 a barrel at 8:49 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, the contract rose 72 cents to settle at $97.88 a barrel.
Oil futures are little changed this year and have lost 34 percent since reaching a record $147.27 a barrel on July 11.
“The run-up to $147 was clearly overdone, but I think selling down past $120 or $100 was overdone, as well,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. “There's a general acknowledgement of fundamental valuation aside from all this financial-market hubbub.''
U.S. stocks rallied the most in six years yesterday on prospects the government will formulate a “permanent'' plan to shore up financial markets, while regulators and pension funds took steps to curb bets against banks and brokerages.
The Dow Jones Industrial Average jumped 617 points from its low of the day and the Standard & Poor's 500 Index climbed 4.3 percent.
Oil tumbled more than $10 in the first two days of the week as Lehman Brothers Holdings Inc. filed for bankruptcy, and Merrill Lynch & Co. was sold to Bank of America Corp.
The U.S. Energy Department reported earlier this week that crude oil stockpiles dropped the most since May because of disruptions from Hurricane Ike. Gold and crops also advanced yesterday.
Nigerian militants stepped up attacks on oil companies, raising concern supply may be disrupted. Nigeria lost 280,000 barrels of daily crude output to attacks launched by militants in the Niger Delta oil region since Sept. 13.
“Current shut-in production stands at about 1 million barrels a day, but it's not necessarily due to militant attacks,'' Levi Ajuonuma, a spokesman for the Nigerian National Petroleum Corp., said by phone from the country's capital, Abuja. “Only 28 percent is because of militant action.''
The U.S. currency touched a two-week low against the euro after the world's biggest central banks said they will act to revive financial markets, reducing demand for the currency as a haven. The dollar slid as much as 1.3 percent to $1.4509.
Gold has risen 15 percent in the past two days. Gold futures for December delivery gained $46.50, or 5.5 percent, to $897 an ounce on the Comex division of the Nymex. Earlier, the price touched $926.
“The weaker greenback and new supply risks around the world are reviving the oil price,'' said Eugen Weinberg, a commodity analyst at Commerzbank AG in Frankfurt. “We saw during the first wave of the credit crisis that people consider oil and gold to be safe havens, and they may be doing the same now.''
U.S. crude-oil stockpiles fell 6.33 million barrels to 291.7 million barrels last week, according to the Energy Department. It was the fourth straight weekly inventory decline.
U.S. energy companies have about 93 percent of oil production and 78 percent of natural-gas output idled in the Gulf of Mexico after Hurricanes Gustav and Ike, the U.S. Minerals Management Service, said in a statement yesterday on its Web site.
Brent crude oil for November settlement rose 35 cents, or 0.4 percent, to $95.19 a barrel on London's ICE Futures Europe exchange yesterday.
Oil retreated earlier because of declines in natural gas and gasoline as energy companies returned some production platforms to service and started refineries after Hurricane Ike struck Texas on Sept. 13.
Supplies of natural gas rose 67 billion cubic feet in the week ended Sept. 12 to 2.972 trillion cubic feet, the Energy Department reported. Analysts expected an increase of 63 billion, based on the median of 23 estimates in a Bloomberg survey. Demand for natural gas declined amid blackouts and factory shutdowns after the hurricane.
“There was some softness already in the products, and the natural gas market saw some big builds in storage,'' said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky.
Gasoline for October delivery rose 1.94 cents, or 0.8 percent, to $2.4824 a gallon.
Author: Jo Amey
