Wednesday, November 3, 2010
Commodity Corner: Crude Oil Passes $85 Mark
The central bank's action, commonly called "QE2" to reflect the Fed's second attempt to stimulate the economy by printing more money through a policy of "quantitative easing," is meant to induce businesses and consumers to borrow more from lenders. Because more money will be in circulation, it should also devalue the dollar. Consequently, oil and other commodities priced in dollars are expected to become a better buy for those holding other currencies.
Also supporting oil was a weekly U.S. Department of Energy report observing that the country's gasoline stocks fell again last week. December gasoline futures consequently rose three cents to settle at $2.14 a gallon. According to the Energy Information Administration, U.S. gasoline inventories remain relatively high; however, they have declined sharply and continuously for five of the past six weeks.
EIA attributes the decline to reduced imports from Europe and Canada as well as higher than average domestic refinery outages in September and October. Gasoline traded from $2.11 to $2.15 Wednesday. Natural gas for December delivery slipped three cents to end the day at $3.84 per thousand cubic feet. During Wednesday's trading, natural gas traded within a range from $3.79 to $3.90.
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