Weak dollar gives oil yet another boost
COLUMBUS, Ohio — The weakened dollar boosted oil prices once again Tuesday, ending a two-day slump.
Benchmark crude for August delivery rose $1.74 to settle at $69.24 a barrel on the New York Mercantile Exchange.
There has been some optimism about an economic rebound, which would tend to lift energy markets, but the value of the U.S. currency is playing an even bigger role in prices for everything from oil to gasoline on Nymex.
Crude is priced in the U.S. currency and a lot of money has flooded into the market with big investors using oil as a hedge against inflation. The dollar fell 2.37 cents against the euro Tuesday.
Energy experts believe the falling dollar has resulted in artificially high prices for the past couple of months. Retail gas prices rose every day for nearly two months until Monday, though they remain well below last summer’s prices.
Just how much the dollar is influencing energy prices may become clear Wednesday, as the Federal Reserve meets to talk about U.S. interest rates.
Few expect that rates will be raised right now, but everyone will be parsing the language of the Fed statement to determine if a rate hike is even possible in the near term.
Another sign of how much demand there is for crude and gasoline arrives Wednesday when the government releases its weekly supply report.
Millions of barrels of unused gasoline are being pumped into storage houses and the Energy Department is likely to report more of the same on Wednesday.
Prices at the pump fell for a second straight day Tuesday after a moving up 54 straight days. Prices slipped 0.7 cents to an average of $2.683 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 26.5 cents higher than a month ago, but $1.389 below where they were a year ago.
Another economic report out of Europe Tuesday suggested demand for energy will probably be week for some time.
Unemployment in 30 of the most developed market democracies will continue to rise and eventually reach 10 percent in 2010, according to the Paris-based Organization for Economic Cooperation and Development.
In other Nymex trading, gasoline for July delivery rose 3.35 cents to settle at $1.8932 a gallon and heating oil rose 4.15 cents to settle at $1.769. Natural gas for July delivery fell 6.4 cents to settle at $4.007 per 1,000 cubic feet.
In London, Brent prices rose $1.82 to settle at $68.80 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.
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