Sunday, June 08, 2008 9:49:48 AM
It's nice owning oil here:
Crude Skyrockets To Record $138.54 On Dollar's Sell-Off
BY BRAD KELLY
Posted 6/6/2008
Oil soared nearly $11 to a record high Friday on a plunging dollar, bullish crude price targets and renewed Iran tensions.
U.S. light sweet crude for July delivery shot up $10.75 to $138.54 a barrel. That followed Thursday's jump of $5.49. Other commodities also surged.
The move roiled Wall Street, with the Dow, Nasdaq and S&P 500 all falling 3% or more.
A high-ranking Israeli official said an attack on Iranian nuclear sites is "unavoidable." Morgan Stanley forecast that oil could reach $150 by July 4.
But the greenback fell hard for a second day after the Labor Department said the jobless rate suffered its worst one-month rise in 22 years while payrolls fell for a fifth straight month.
Oil and raw materials are priced in dollars, so they tend to rise when the U.S. currency falls.
The euro rose 1.85 cents to $1.5775. It swelled 1.51 cents on Thursday.
"(Friday's) jump was an extension of a rally that started on Thursday afternoon when the greenback got hammered due to comments made by (Jean-Claude) Trichet about raising interest rates," said Pratts energy analyst Linda Rafield.
The European Central Bank president said Thursday that interest rate hikes could come as soon as July to fight inflation, surprising traders that had speculated about rate cuts later this year.
Earlier in the week, the dollar rallied on signs that U.S. rates had bottomed out and might even start to rise later this year.
Fed chairman Ben Bernanke signaled on Wednesday that the central bank is worried about the dollar, saying its slide has led to "unwelcome" inflation pressures.
But Trichet upended hopes for lower ECB rates on Thursday while Friday's jobs report squashed talk of Fed rate hikes for the foreseeable future.
"The record-high oil prices continue to squeeze consumers, who are dealing with a weak job market," said Scott Brown, chief economist at Raymond James. "The higher energy costs go, the more likely consumers are to rein in spending, which is not a good sign for a slowing economy."
Oil had retreated to $122.30 on Wednesday on evidence that high gasoline prices are finally starting to have a real impact. U.S. gasoline use fell 3.9% in the latest week vs. a year ago, the largest drop since post-Katrina disruptions.
"There is no doubt that gasoline demand is waning in the U.S., but it is still robust around the rest of the world," said Bart Melek, a BMO Capital Markets analyst.
Global demand is being driven by fast-growing Asia, Mideast and Latin America. Rising incomes means tens of millions of people in these countries can afford to buy cars, and many aren't paying close to a market rate for gasoline.
"In Asia, especially in China, demand is still rising because the governments subsidize so much of the price of fuel," Melek said. "While subsidy cuts are being made in India and Malaysia, it may not be enough to slow oil use."
Gasoline futures spiked 15.7 cents to $3.4915 a gallon on Friday. Heating oil vaulted 23.72 cents to $3.918.
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Crude Skyrockets To Record $138.54 On Dollar's Sell-Off
BY BRAD KELLY
Posted 6/6/2008
Oil soared nearly $11 to a record high Friday on a plunging dollar, bullish crude price targets and renewed Iran tensions. U.S. light sweet crude for July delivery shot up $10.75 to $138.54 a barrel. That followed Thursday's jump of $5.49. Other commodities also surged.
The move roiled Wall Street, with the Dow, Nasdaq and S&P 500 all falling 3% or more.
A high-ranking Israeli official said an attack on Iranian nuclear sites is "unavoidable." Morgan Stanley forecast that oil could reach $150 by July 4.
But the greenback fell hard for a second day after the Labor Department said the jobless rate suffered its worst one-month rise in 22 years while payrolls fell for a fifth straight month.
Oil and raw materials are priced in dollars, so they tend to rise when the U.S. currency falls.
The euro rose 1.85 cents to $1.5775. It swelled 1.51 cents on Thursday.
"(Friday's) jump was an extension of a rally that started on Thursday afternoon when the greenback got hammered due to comments made by (Jean-Claude) Trichet about raising interest rates," said Pratts energy analyst Linda Rafield.
The European Central Bank president said Thursday that interest rate hikes could come as soon as July to fight inflation, surprising traders that had speculated about rate cuts later this year.
Earlier in the week, the dollar rallied on signs that U.S. rates had bottomed out and might even start to rise later this year.
Fed chairman Ben Bernanke signaled on Wednesday that the central bank is worried about the dollar, saying its slide has led to "unwelcome" inflation pressures.
But Trichet upended hopes for lower ECB rates on Thursday while Friday's jobs report squashed talk of Fed rate hikes for the foreseeable future.
"The record-high oil prices continue to squeeze consumers, who are dealing with a weak job market," said Scott Brown, chief economist at Raymond James. "The higher energy costs go, the more likely consumers are to rein in spending, which is not a good sign for a slowing economy."
Oil had retreated to $122.30 on Wednesday on evidence that high gasoline prices are finally starting to have a real impact. U.S. gasoline use fell 3.9% in the latest week vs. a year ago, the largest drop since post-Katrina disruptions.
"There is no doubt that gasoline demand is waning in the U.S., but it is still robust around the rest of the world," said Bart Melek, a BMO Capital Markets analyst.
Global demand is being driven by fast-growing Asia, Mideast and Latin America. Rising incomes means tens of millions of people in these countries can afford to buy cars, and many aren't paying close to a market rate for gasoline.
"In Asia, especially in China, demand is still rising because the governments subsidize so much of the price of fuel," Melek said. "While subsidy cuts are being made in India and Malaysia, it may not be enough to slow oil use."
Gasoline futures spiked 15.7 cents to $3.4915 a gallon on Friday. Heating oil vaulted 23.72 cents to $3.918.
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