Oil soars to two-year high on cold, weak dollar

Monday, 6 December 2010 00:01 -     - {{hitsCtrl.values.hits}}

New York (Reuters): U.S. oil prices rose to a 25-month high on Friday, the third straight rise, as a weaker U.S. dollar spurred commodities investment and cold weather in Europe and the U.S. Northeast lifted heating fuel futures.

The euro rallied versus the dollar after the U.S. government said nonfarm payrolls increased much less than expected and the unemployment rate rose to a seven-month peak.

Plunging temperatures in Europe and colder weather in parts of the United States prompted a surge in demand for heating oil and other heating fuels.

U.S. crude futures for January rose $1.19 to settle at $89.19 a barrel, the highest close since October 7, 2008, bouncing after an early decline on the weak jobs data.

Prices rose 6 percent over three days, the biggest such percentage increase since the three days to Oct 1.

For the week, U.S. crude rose 6.48 percent, a second straight weekly gain and the best percentage gain since the 6.66-percent boost in the week to November 5.

Total U.S. crude trading volume was above 790,000 on Friday, with less than an hour of post-settlement trading left, 30 percent above the 30-day average.

ICE Brent crude futures traded up $1.12 to $91.80, after setting a fresh two-year high of $91.85.

“Today’s crude prices are up with support from higher heating oil on the back of cold weather both here in the U.S. and in Europe and the weakened dollar, which has also encouraged buying,” said Andy Lebow of MF Global in New York.

Twelve people froze to death in Poland overnight and air, rail and road traffic across Northern Europe remained badly disrupted by snow and ice on Friday.

The U.S. National Weather Service, in its eight to 14-day outlook issued on Thursday, called for below-normal temperatures for much of the eastern half of the country, which includes the world’s largest regional market for heating oil.

Front-month U.S. heating oil rose 1.3 percent on Friday.

The U.S. dollar .DXY fell about 1.4 percent against a basket of foreign currencies on Friday, as the jobs report weighed on the greenback and the euro was supported by more confidence that Europe can eventually solve its debt crisis.

Oil and dollar-denominated commodities often move inversely to the dollar. A weaker dollar typically lifts oil prices as it lowers the value of greenbacks paid to producers while making it less expensive for oil consumers using other currencies.