Oil rises to nearly $115
Tuesday, 26 August 2008

Oil prices edged up to nearly $115 a barrel Monday as the U.S. dollar lost some ground against the euro and the Japanese yen, making commodities more attractive to investors, reports AP.

By afternoon in Europe, light, sweet crude for October delivery was up 38 cents to $114.97 a barrel in electronic trading on the New York Mercantile Exchange. The contract tumbled $6.59 on Friday to settle at $114.59 a barrel.
Analysts said this week -- with U.S. markets headed toward the Labor Day holiday next Monday -- would likely be characterized by volatile prices and low trading volumes.
''In the process of trading up and down dramatically, last week, it has become clear that only one factor really matters right now,'' said analysts at U.S. energy consultancy Cameron Hanover. ''That's the dollar.''
In a daily market report, Cameron Hanover said oil fundamentals and just about every other factor influencing prices seemed to have taken a back seat to the dollar.
It would take something like a direct hit by a hurricane on oil facilities ''to unhook oil from the U.S. currency,'' the report said. ''Big-money investors have turned oil into a proxy for the U.S. dollar.''
Unresolved tensions between the U.S. and Russia over the conflict in Georgia caused concerns about supplies in the region and continued to lend support to oil prices, as investors speculate whether oil-rich Russia will use supplies to punish the West.
Russia pulled the bulk of its troops and tanks out Friday under a cease-fire agreement, but built up its forces in and around South Ossetia and Abkhazia, another separatist region. They also left other military posts at locations inside Georgia proper.
A U.S. Navy destroyer loaded with humanitarian aid reached Georgia's Black Sea port of Batumi on Sunday, a move that a Russian general suggested would worsen tensions between the former Cold War foes.
A Monday vote by Russian lawmakers unanimously asking President Dmitry Medvedev to recognize the independence of Georgia's two rebel provinces added to the concerns of energy markets.
Despite the conflict, some analysts said energy flows from Russia to the West were safe.
''We continue to see little chance for oil to be used by Russia as a bargaining tool,'' said Olivier Jakob of Petromatrix in Switzerland. ''Oil is the weapon of last resort, not of first resort ... and it would make no sense for Russia to limit exports of crude or products to European countries.''
After gaining early in the session, the U.S. dollar lost ground to the euro and the Japanese yen on Monday.
By afternoon in Europe, the euro rose to $1.4792 from $1.4775 late Friday in New York.
The dollar also fell slightly against the Japanese currency, buying 109.64 yen, down from the 110.03 late Friday in New York.
A falling dollar encourages investors to buy crude oil and other commodities as a hedge against inflation and weakness in the U.S. currency.
In other Nymex trading, heating oil futures rose 3.22 cents to $3.1633 a gallon, while gasoline prices gained 1.50 cents to $2.8836 a gallon. Natural gas futures fell 6.7 cents to US$7.776 per 1,000 cubic feet.
In London, October Brent crude was up $1.56 to $115.48 on the ICE Futures exchange.

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