Oil Rises a Second Day on Dollar Drop, Gasoline Supply Forecast

By Mark Shenk

Aug. 20 (Bloomberg) -- Crude oil rose for a second day as a weakening dollar prompted investors to purchase commodities as an inflation hedge.

Oil and gold rebounded as the dollar fell against the euro from its strongest since Feb. 20. Oil also gained on forecasts a government report today will show a fourth weekly decline in U.S. gasoline stockpiles.

``At this stage, the gyrations of the dollar are the primary movers of the oil market,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The focus will remain on the value of the dollar against the euro.''

Crude oil for September delivery rose as much as 67 cents, or 0.6 percent, to $115.20 a barrel and was at $115 at 8:16 a.m. Sydney time on the New York Mercantile Exchange. Futures touched a 15-week low of $111.34 a barrel on Aug. 15. Prices are up 62 percent from a year ago. Yesterday, futures gained $1.66, or 1.5 percent, to settle at $114.53 a barrel.

The September oil contract expires at the close of Nymex trading today. The more-active October contract gained 71 cents, or 0.6 percent, to $115.25 a barrel.

The U.S. Dollar Index in New York, which tracks the currency against six others, fell for a third day after rising to its highest since January last week. The index, traded on ICE Futures in New York, was down 0.1 percent to 76.742.

Gasoline Supplies

U.S. supplies of gasoline probably fell 3 million barrels last week from 202.8 million barrels the previous week, according to the median of 13 responses in a Bloomberg News survey of analysts. The Energy Department is scheduled to release the report at 10:35 a.m. in Washington.

Gasoline for September delivery rose 4.87 cents, or 1.7 percent, yesterday to settle at $2.8639 a gallon in New York. Futures reached a record $3.631 a gallon on July 11.

Pump prices haven't increased since July 19, according to the AAA, the nation's largest motorist organization. Regular gasoline, averaged nationwide, fell 1.1 cents to $3.73 a gallon, the AAA said yesterday on its Web site. Prices reached a record $4.114 a gallon on July 17.

The report ``is almost sure-fire to be bullish,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``Refineries are nowhere near producing enough fuel to meet our needs.''

Inventories of crude oil probably rose 1.05 million barrels in the week ended Aug. 15, the survey showed. Stockpiles of distillate fuel, including heating oil and diesel, probably rose 1 million barrels.

``Crude oil stocks should be up or down by 1 million barrels while gasoline stocks fall and distillates rise,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``If distillates drop or gasoline has another whopping decline, there will be a big reaction.''

Brent crude oil for October settlement rose $1.31, or 1.2 percent, to settle at $113.25 a barrel on London's ICE Futures Europe exchange.

Venezuela, South America's biggest oil producer, will propose that the Organization of Petroleum Exporting Countries cut oil output quotas if prices continue to fall, Energy and Oil Minister Rafael Ramirez said. OPEC, which is responsible for more than 40 percent of global oil production, is scheduled to meet next on Sept. 9 in Vienna.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.