Tuesday, October 5, 2010

Commodity Corner: Weaker Dollar, Surging Equities Propel Dollar

Light, sweet crude for November delivery ended the day on a five month high Tuesday after the dollar weakened and equities markets surged. Crude futures settled at $82.82 a barrel Tuesday on the New York Mercantile Exchange, a $1.35 increase from the previous day. Oil prices tend to correlate with the dollar's relationship to the euro nowadays. On Tuesday the dollar lost ground against euro, supporting oil prices.

The dollar also plummeted against the yen Tuesday. Japan's Central Bank reported that it would cut benchmark interest rates to almost zero in an effort to boost that country's economy. By expanding its liquidity measures, growth oriented assets such as stocks and commodities become cheaper for investors to buy.

The Dow Jones Industrial Average increased more than 200 points in afternoon trading while both NASDAQ and S&P 500 rose more than two percent. Additionally, the disruption in crude shipments in the Houston Ship Channel and the strike at French terminals have also contributed to the increase in oil prices.

November crude oil fluctuated within a range from $81.15 to $82.99.

Henry Hub natural gas futures continued to weaken Tuesday as stockpiles remain abundant and mild weather lingers. Traders anxiously await the upcoming heating season, when cooler temperatures will increase demand for gas heating and hence natural gas fired electricity. Natural gas ended Tuesday's trading session at $3.74 per thousand cubic feet, up a penny from Monday. Natural gas traded from $3.69 to $3.78.

The reformulated gasoline blendstock futures price for November rose to $2.13 a gallon, a 4 cent improvement from Monday and its highest level since Aug. 5. Gasoline prices peaked at $2.13 and bottomed out at $2.08.

Courtesy of The Commodity Corner, Rigzone.Com

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