Filed under: International markets, Bad news, Exxon Mobil (XOM), Middle East, Commodities, Oil, Headline news
Crude oil jumped about 2% Tuesday morning to around $96.50 per barrel after the dollar fell to a new low against the euro.
Heating oil also jumped about 5 cents to $2.65 and unleaded gasoline surged about 3.5 cents ahead of the [U.S.] Thanksgiving holiday, historically a very high gasoline consumption period in the United States.
Dollar affects oil
Jim Dietz, independent energy trader, told Bloggingstocks Tuesday that in addition to solid U.S. gasoline demand, strong emerging market oil demand, and geopolitical concerns, there’s another factor supporting oil’s price: crowding-out by Europeans and others with strong currencies.
“When the euro rises against the dollar, that means Europe can buy more oil, which is priced in dollars, with their euros,” Dietz said. “So they tend to overbid a little and that’s what’s giving oil a little bump today.” Earlier in the day the euro rose to a new high of $1.48 against the dollar before pulling back slightly.
Oil demand persists
However, Dietz underscored that the long-term, secular factors are the real pillars supporting oil’s high price.
“It’s demand, there’s no two ways around it. Gasoline demand in the U.S., and substantial oil use gains in Asia,” Dietz said. “At some price level, if markets operate as they should, demand destruction has got to take place. But that day isn’t today.”
Dietz said he’s long West Texas Intermediate Crude, unleaded gasoline and heating oil, both with day trades and monthly trades. Dietz is also long with natural gas with a monthly trade.
“I see tiny regarding fundamentals to recommend that the long-term oil higher trend is likely to end anytime soon,” Dietz added.
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