Oil ends at 25-month high on weak dollar: U.S. data

By Gene Ramos

NEW YORK (BestGrowthStock) – Oil prices rallied on both sides of the Atlantic on Thursday and ended at their highest levels in 25 months, as a weaker dollar prompted investors to buy riskier assets such as oil and other commodities.

Oil investors also took the cue from Wall Street, which cheered upbeat U.S. data on housing and retail sales, indicating the economic recovery was getting traction and boding well for future oil demand. (.N: )

“The improved U.S. economic climate that has spurred this week’s upside acceleration in equities is an important driver of higher oil values and we look for this pattern to be continued with tomorrow’s release of the nonfarm payrolls number,” said Jim Ritterbusch, president of independent consultants Ritterbusch & Associates in Galena, Illinois.

U.S. crude for January delivery settled up $1.25, or 1.44 percent, at $88 a barrel, the highest since October 8, 2008. Prices were up for a second day, with the two-day gain of 4.62 percent, the highest since October 2, when prices rose 4.8 percent.

In London, ICE January Brent crude ended $1.82 higher, or 2.05 percent, at $90.69, the highest since October 1, 2008.

Both U.S. heating oil and gasoline futures rallied, supporting crude’s rise. Heating oil rose amid colder temperatures in the U.S. Northeast, the biggest heating oil market. Gasoline gained on regional supply tightness in the key East Coast market.

January heating oil ended up 4.90 cents, or 2.04 percent, at $2.4564, the highest since October 8, 2008. January RBOB gasoline finished up 5.49 cents, or 2.39 percent, at $2.3553, the highest since May 3.

The dollar fell as the euro rallied in volatile trading on reports that the European Central Bank was buying bonds of Portugal and Ireland, easing some concerns about the region’s fiscal troubles.

Uncertainty still remains, however, about the outlook of peripheral euro zone countries.

Earlier, the euro fell (Read more about the trembling euro. ) after ECB President Jean-Claude Trichet disappointed investors as he did not announce a more aggressive policy in response to the euro zone debt crisis.

At its Thursday meeting, the ECB kept its key interest rate at a record low of one percent and pledged to extend its liquidity safety net for banks at least until April next year.

U.S. ECONOMY’S BRIGHT LININGS

U.S. unemployment benefit claims rose last week, but the closely watched four-week average touched a two-year low, making oil investors reconsider an earlier knee-jerk reaction to the weekly data.

The day’s economic reports also showed U.S. retail sales were stronger than expected in November as shoppers went in droves and spent more during the annual discount spree known as Black Friday, the day after Thanksgiving.

Another report showed that home sales in October jumped 10.4 percent, against economists’ forecast for an 0.5 percent decline, according to the National Association of Realtors.

Oil investors were gearing for Friday’s U.S. employment report for November.

U.S. nonfarm payrolls likely increased last month by 140,000, extending the rise to a second month amid strong gains in private hiring reported on Wednesday, according to a Reuters poll. The data is due Friday morning.

Even with improving labor market conditions, however, the unemployment rate was expected to remain at a lofty 9.6 percent for a fourth straight month.

U.S. crude oil prices are less than a dollar way from the $88.63 year’s peak hit on November 11, itself the highest since prices hit $89.82 on October 9, 2008.

Investment bank Goldman Sachs forecast on Wednesday that U.S. crude prices are likely to average $100 a barrel in 2011 and $110 a barrel in 2012 on the back of a “new structural bull market.”

On Wednesday, U.S. crude oil inventory data from the Energy Information Administration showed a surprise gain of 1.1 million barrels. Stocks at the key delivery point in Cushing, Oklahoma, rose by 910,000 barrels to 34.5 million barrels, the EIA said.

Separately, industry data provider Genscape said in a report on Thursday that oil stored at the hub, fell by 416,301 barrels to 36.71 million barrels in the week to November 30.

(Additional reporting by Zaida Espana in London and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy)

Oil ends at 25-month high on weak dollar: U.S. data