Oil Rises More Than $2 as Weak Dollar Spurs Commodity Purchases
By Mark Shenk
April 4 (Bloomberg) -- Crude oil rose more than $2 a barrel as the dollar fell against the euro, prompting investors to purchase commodities.
The dollar weakened after a government report showed the U.S. economy lost jobs for a third straight month in March, raising concern that the country is slipping into a recession. Investors moved money into commodities to hedge against inflation as returns outpaced those of financial markets.
``The oil market hasn't moved on the fundamentals for a long time,'' said Tom Bentz, a broker at BNP Paribas in New York. ``The movement in prices has been all about the falling dollar and the flow of money into the commodity markets.''
Crude oil for May delivery rose $2.40, or 2.3 percent, to settle at $106.23 a barrel at 2:43 p.m. on the New York Mercantile Exchange. Prices rose 0.6 percent this week and are up 65 percent from a year ago.
Brent crude for May settlement rose $2.38, or 2.3 percent, to $104.90 a barrel on London's ICE Futures Europe exchange, the highest close since March 27. Futures reached a record $108.02 a barrel on March 14.
Gasoline and heating-oil futures rose as fires broke out at refineries owned by Exxon Mobil Corp. in California and Neste Oil Oyj in Finland. A unit closed at a Valero Energy Corp. refinery in California and a fault was reported at a Royal Dutch Shell Plc plant in England.
Torrance Refinery
The fire at Exxon Mobil's refinery in Torrance, California, has been extinguished, police said. The blaze started about 8:30 a.m. local time and was put out by about 9 a.m., Lieutenant Lloyd Degonia, a spokesman for the Torrance police department, said in a telephone interview. The facility can process 155,800 barrels of crude oil a day, according to the Energy Department.
The impact of the refinery fires ``would have been bigger if it were another time of year,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``Right now we're between the winter heating season and summer gasoline season.''
Gasoline for May delivery rose 3.24 cents, or 1.2 percent, to settle at $2.7567 a gallon in New York. Futures touched $2.7836 on April 2, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.
Pump prices are following futures higher. Regular gasoline, averaged nationwide, rose 1.4 cents to a record $3.303 a gallon, AAA, the nation's largest motorist organization, said today on its Web site.
U.S. payrolls shrank by 80,000, more than forecast, after a decrease of 76,000 in February that was more than initially reported, the Labor Department said today in Washington. The jobless rate climbed to 5.1 percent from 4.8 percent.
Economic Slowdown
Federal Reserve Chairman Ben S. Bernanke said this week that the economy may contract in the first half of this year. The Fed has lowered its target for the benchmark overnight interest rate by 3 percentage points since Sept. 18 to 2.25 percent as the housing slump threatens to trigger a recession.
New York futures prices rose to a record $111.80 a barrel on March 17 in New York as investors purchased commodities in response to the plunging dollar. Gold, platinum, wheat and soybeans were all pushed to records in March.
``We are seeing factors other than fundamentals drive the market,'' Nigerian Oil Minister Odein Ajumogobia said yesterday at an oil summit in Cancun, Mexico.
Thirteen countries make up the Organization of Petroleum Exporting Countries, which controls 40 percent of the world's oil. OPEC members are scheduled to hold an informal meeting in Rome on April 20.
Demand From China
The decline in U.S. consumption is being countered by demand from India and China, Ecuador's Energy and Mines Minister Galo Chiriboga said in Cancun. Ecuador is OPEC's newest and smallest member.
OPEC production fell 85,000 barrels a day to an average 32.35 million barrels a day in March, according to a Bloomberg News survey of oil companies, producers and analysts. Nigerian production fell 80,000 barrels to an average 1.96 million barrels a day last month, the lowest since April 2003, the survey showed.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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