Oil rises above $83 on dollar weakness, China

By Robert Gibbons

NEW YORK (BestGrowthStock) – Oil prices rose above $83 a barrel on Wednesday as the dollar slumped amid reinforced expectations of more monetary easing by the U.S. central bank and on news that China’s crude imports jumped in September.

The U.S. dollar fell against most currencies, a day after minutes from the Federal Reserve’s September meeting reinforced expectations for more monetary easing in the United States.

Oil brokers and analysts said the euro’s failure early on Wednesday to hold above $1.40 had limited losses by the dollar and gains by oil.

U.S. crude for November delivery rose $1.34, or 1.64 percent, to settle at $83.01 per barrel, having traded from $81.68 to $83.45. In London, ICE Brent November crude rose $1.14, or 1.37 percent, to settle at $84.64 a barrel.

“It’s mainly the dollar, which weakened on the expectation there will be quantitative easing,” said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut. “The IEA raised its (2010) demand expectation a little and the Chinese imports number helped and the stock market is up.”

U.S. stock indexes rose, boosted by strong company earnings, upbeat data from China and anticipation of more government debt purchases by the Fed, called quantitative easing, or QE2 on financial markets.

“QE2 is influencing prices via the U.S. dollar, on expectations that further easing will push the dollar lower and send oil rising,” Commerzbank analyst Carsten Fritsch said.

A weak dollar can lift oil prices by making dollar-denominated crude oil less expensive for buyers using other currencies, lowering the value of greenbacks paid to producers and attracting investors looking to shift from cash to commodities. (Graphic: http://link.reuters.com/bet38p )

Oil prices drew support early from data showing China’s crude oil imports rose 35 percent in September from a year earlier. The International Energy Agency said China had overtaken the United States as the world’s largest energy consumer.

The IEA on Wednesday said oil demand growth was expected to accelerate for the rest of 2010, but the agency revised lower its demand expectation for 2011.

The U.S. Energy Information Administration on Wednesday cut its 2011 oil demand growth forecast slightly, but also raised its 2010 forecast. The EIA also raised its 2010 non-OPEC oil output growth expectation. [ID:nN13249765]

French unions extended a rail strike into a second day and blockaded oil refineries to protest pension reforms, but there were signs the stoppages could be losing steam as broad participation wavered.

The IEA said France tapped emergency oil stocks as the country copes with a near halt in oil refining due to strikes at refineries and its top oil port.

Organization of the Petroleum Exporting Countries oil ministers were set to meet in Vienna on Thursday for the first time in seven months.

OPEC has signaled it will keep output targets steady. But there have been calls for more target compliance and concern about the declining value of the dollar.

U.S. INVENTORIES

While the dollar’s lower value helped push oil prices up, traders and analysts remain concerned about high U.S. oil inventories and tepid demand.

Ahead of weekly inventory reports, a Reuters analyst survey yielded a forecast for U.S. crude inventories to have risen 1.1 million barrels last week. (EIA/S: ) Distillate stocks, including heating oil and diesel, were expected to have declined by 1.1 million barrels, with gasoline stockpiles declining 1.0 million barrels.

Late on Tuesday, industry group the American Petroleum Institute reported crude oil stockpiles fell 4 million barrels in the week to October 8.

Gasoline stocks fell 1.9 million barrels and distillate stocks fell only 254,000 barrels, according to the API.

Oil futures prices extended gains in post-settlement trading on the API news, rising to $83.19, up $1.52 at 4:51 p.m. EDT (2051 GMT).

The government’s inventory and demand data from the U.S. EIA will arrive on Thursday at 11 a.m. EDT (1500 GMT).

The reports were delayed a day because of Monday’s U.S. Columbus Day holiday.

(Additional reporting by Zaida Espana in London and Alejandro Barbajosa in Singapore; Editing by David Gregorio)

Oil rises above $83 on dollar weakness, China