<http://biz.yahoo.com/ap/080821/oil_prices.html> Oil Jumps $6 on US-Russia
Tensions, Sliding Dollar- AP
Oil prices shot up $6 a barrel Thursday, rising to the highest level in over
two weeks as escalating tensions with Russia stoked fears of a disruption of
energy shipments to Western countries.
Oil jumps $6 on US-Russia tensions, sliding dollar
Thursday August 21, 11:35 am ET
By Stevenson Jacobs, AP Business Writer
Oil jumps $6 on growing US-Russia tensions, sliding dollar, worries of OPEC
output cut
NEW YORK (AP) -- Oil prices shot up $6 a barrel Thursday, rising to the
highest level in over two weeks as escalating tensions with Russia stoked
fears of a disruption of energy shipments to Western countries.
Crude's rally mimicked the wild price swings seen last month and have at
least temporarily halted oil's slide back toward $100 a barrel. A weaker
U.S. dollar and worries about tightening output from OPEC countries are also
supporting prices.
Tensions with Russia about a deal between Washington and Poland to install a
missile defense system in Eastern Europe -- seen as a threat by Moscow --
and the continued presence of Russian troops in Georgia contributed greatly
to the bullish mood.
Light, sweet crude for October delivery jumped $6.32 to $121.88 a barrel on
the New York Mercantile Exchange. It was crude's highest trading level since
Aug. 4.
"The sellers are backing away for now," said Jim Ritterbusch, president of
energy consultancy Ritterbusch and Associates in Galena, Ill. "If military
activity heats up again, pipeline flows into Europe could be disrupted and
that would affect the United States as well."
The price jump came as retail gas prices continued to fall, shedding more
than a penny overnight to a new national average of $3.702, according to
auto club AAA, the Oil Price Information Service, and Wright Express. Prices
have now fallen 10 percent from record highs above $4 a gallon set July 17,
but the pace of the drop off could slow if oil holds onto Thursday's gains.
"This is probably about it in terms of a retail gas drop. We may be a few
cents away from the August bottom," said Tom Kloza, publisher and chief
analyst at the Oil Price Information Service in Wall, N.J.
Oil's jump came a day after the U.S. government report a huge rise in U.S.
crude inventories. But other supplies were less abundant.
Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to
below-average levels in the week ended Aug. 15, the U.S. Energy Department's
Energy Information Administration said Wednesday. Meanwhile, distillate
inventories -- which include heating oil and diesel fuel -- rose by less
than expected, the EIA said.
That was enough to offset a hefty 9.4 million barrel rise in U.S. crude
stocks last week when the average analyst forecast had been for a 1.7
million barrel increase, according to energy information provider Platts.
"That report had something for everyone," said David Moore, a commodity
strategist at Commonwealth Bank of Australia in Sydney. "On the one hand,
the crude inventory buildup was quite strong, but the gasoline draw was also
very prominent."
But growing concerns over Russia's standoff with Georgia and NATO grabbed
the attention of most oil traders Thursday.
On Wednesday, Secretary of State Condoleezza Rice and her Polish counterpart
signed a deal to build an American missile defense base in Poland. Last
week, a top Russian general warned Poland was risking an attack, possibly a
nuclear one, by developing the base.
JBC Energy in Vienna said the "political risk premium of oil prices" had
widened to more than $10 a barrel, which could be attributed at least in
part to the Russian angle.
Investors are also trying to anticipate the outcome of the next Organization
of the Petroleum Exporting Countries meeting in early September, as supply
concerns could rise further if members of the cartel decide to lower their
output in response to slower demand. Venezuelan Oil Minister Rafael Ramirez
said he might propose an output cut at the next OPEC meeting.
U.S. energy consultancy Cameron Hanover noted in its daily market report
that some members of the oil group were "terrified of allowing Western
countries to build any kind of cushion for the unexpected, because it has
the potential to return prices to normal or sustainable economic levels" and
interfere with OPEC's ability to keep building massive foreign currency
reserves.
Oil prices have rebounded after falling about $35, or nearly a quarter, from
their all-time trading record $147.27 on July 11. Many investors expect that
high gasoline prices and slowing economic growth in the U.S., Europe and
Japan will undermine global energy demand.
Prices were supported Thursday by a weaker dollar compared to the euro. A
falling greenback encourages investors to seek commodities such as oil as a
hedge against inflation and a weaker dollar.
"The slide in the dollar has taken some of the wind out of the bear's sail
in the energy complex," said The Schork Report, edited by analyst and trader
Stephen Schork.
In other Nymex trading, heating oil futures rose 17.75 cents to $3.3421 a
gallon, while gasoline prices gained 15.15 cents to $3.0618 a gallon.
Natural gas futures increased 27 cents to $8.355 per 1,000 cubic feet.
In London, October Brent crude rose $5.57 to $119.93 a barrel.
