Alexa
  • Directory of Taiwan

Oil rises as dollar retreats against euro, yen

Oil rises as dollar retreats against euro, yen

Oil prices reflected changes in the U.S. dollar's exchange rate on Tuesday, rising as the currency weakened and falling back when the greenback strengthened.
Concerns that Hurricane Gustav may disrupt oil operations in the Gulf of Mexico and Russia's decision to recognize the independence of two breakaway provinces in Georgia magnified bullish sentiments.
By afternoon in Europe, light, sweet crude for October delivery was up US$1.11 cents to US$116.22 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, when the dollar strengthened, Nymex oil fell as low as US$112.36 before gaining again.
The contract rose 52 cents overnight to settle at US$115.11 a barrel.
In London, October Brent crude rose 1 cent to US$114.51 a barrel on the ICE Futures exchange.
Oil prices switched directions several times during Tuesday's session, with the dollar swings seen as mostly responsible for the fluctuations.
"The Dollar Index ... has shown that it can at times override the oil fundamentals ... and will probably dominate until Gustav defines a more definitive path," said Olivier Jakob of Petromatrix in Switzerland.
Oil prices typically rise when the dollar falls, as investors buy commodities as a hedge against inflation and weakness in the U.S. currency.
Although the dollar was still stronger Tuesday than Monday, by the afternoon in Europe it had lost some of its gains from earlier in the session against the euro. The euro had fallen below US$1.46, a six-month low, but later climbed back to US$1.4635.
At the same time, the dollar also lost some ground against the Japanese yen, to 109.55 yen compared with 109.78 earlier, but still up from 109.35 on Monday.
Tropical storm Gustav became a hurricane Tuesday as it approached Haiti's southern coast, and is also on track to hit Cuba.
"It's hard to predict where Gustav will strike," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But the market is reacting to it and edging up some."
The National Hurricane Center in Miami said the hurricane's maximum sustained winds were near 80 mph (130 kph).
Haitians were told to prepare for evacuations as the storm formed Monday in the Caribbean. Haiti upgraded storm warnings to hurricane warnings along much of its coast as Gustav closed in from the south.
Forecasters said storm preparations in Haiti should be rushed to completion and that floods and landslides were possible across its southern peninsula. The forecasts suggested Gustav's eye could pass near the capital of Port-au-Prince, home to nearly 3 million people.
Traders worried that the hurricane could head into the Gulf, where there are many oil drilling platforms. The storm was centered about 130 miles (210 kilometers) south-southeast of Port-au-Prince and was moving toward the northwest near 12 mph (19 kph).
Regarding Russia, some analysts and traders fear that mounting tensions with the West over the breakaway Georgian territories of Abkhazia and South Ossetia may increase the risk of an interruption in oil and natural gas flows to Europe, which is greatly dependent on Russian energy supplies.
In other Nymex trading, heating oil futures rose 3.8 cents to US$3.1894 a gallon, while gasoline prices gained 3.86 cents to US$2.9209 a gallon. Natural gas futures increased 39.2 cents to US$8.217 per 1,000 cubic feet.
___
Associated Press writers Alex Kennedy in Singapore and Matt Moore in Frankfurt contributed to this report.