Crude gallops ahead

Prices rise following weak dollar, positive data and latest developments in the euro zone

Crude prices ended substantially higher on Thursday, 27 October at Nymex. Prices rose as the dollar weakened and traders cheered the latest plan of euro zone to contain its sovereign debt crisis. Better than expected economic data also helped prices go up considerably higher.

Light and sweet crude for November delivery rose $3.76 (4.2%) to $93.96 a barrel on the New York Mercantile Exchange on Thursday. That was highest settlement for crude in almost three months time. Last week, crude gained 0.7%. For the month of September, oil futures lost 11%, and for the quarter, crude incurred losses of 17%. It was the worst quarterly performance for crude in almost two years.



Leaders from the European Union addressed uncertainty and frustration related to their ability to create a comprehensive plan aimed at improving financial conditions in their continent by increasing the eurozone bailout fund to about $1.4 trillion, recapitalizing banks, and agreeing to implement 50% haircut on Greece's debt obligations. The news spurred a concerted buying effort that caused US stocks to surge in broad fashion on Thursday.

In the currency market on Thursday, the Dollar Index, which weighs the strength of dollar against basket of six other currencies fell by almost 1.2%.

Latest data in US showed some pleasing GDP data this morning. An advance reading showed that the U.S. economy grew at a 2.5% clip during the third quarter. That exceeded the 2.3% growth rate that had been broadly expected to follow the 1.3% increase posted in the prior quarter. As for weekly initial jobless claims, they remained narrowly above 400,000, as had been expected.

In the latest weekly inventory report, the EIA reported yesterday that crude supplies rose 4.7 million barrels in the week ended 21 October 2011. Market was expecting an increase of 200,000 barrels. The EIA also reported that gasoline inventories decreased by 1.4 million barrels, and distillate inventories decreased by 4.3 million barrels. Market had expected gasoline stockpiles to go down 1.25 million barrels, and distillates stockpiles to go down 1.5 million.

Among other energy products on Thursday, November gasoline rose 9 cents, or 3.4%, to $2.74 per gallon. Heating oil for the same month's delivery added 8 cents, or 2.7%, to $3.10 a gallon.

Natural-gas futures bucked the trend, however, after a government inventories report showed supplies at the higher end of analyst expectations. Natural gas for November delivery declined 7 cents, or 1.8%, to $3.52 per million British thermal units. The Energy Information Administration said inventories of natural gas rose 92 billion cubic feet in the week ended 21 October. Market had expected an increase between 88 billion cubic feet and 92 billion cubic feet.