Oil Rises for the First Time in Three Days as U.S. Dollar Drops

By Grant Smith

Feb. 19 (Bloomberg) -- Crude oil rose for the first time in three days as the U.S. dollar weakened against the euro, boosting the appeal of commodities used to hedge against inflation.

Crude gained as speculation Europe will take steps to address the financial crisis lifted the euro against the U.S. currency, making dollar-priced crude appear cheaper. The American Petroleum Institute said yesterday inventories rose 1.6 million barrels last week to 345.8 million barrels. An Energy Department report due today is expected also to show stockpiles gained.

“The most important reason today is the dollar is showing some weakness against the euro,” said Eugen Weinberg, a Commerzbank AG analyst in Frankfurt. “There will always be a link between the two.”

Crude oil for March delivery rose as much as 81 cents, or 2.3 percent, to $35.43 on the New York Mercantile Exchange. The contract traded at the price at 9:50 a.m. London time. Prices are down 21 percent this year.

March trading ends tomorrow. The more-active April contract was at $38.27 a barrel, up 86 cents, at 9:51 a.m. London time. Brent crude oil for April settlement was at $40.49 a barrel, up 94 cents, on London’s ICE Futures Europe exchange at 9:52 a.m. London time.

The Energy Department report may show that U.S. stockpiles increased 3.2 million barrels last week, according to a Bloomberg News survey of analysts. That would be the 19th time in 21 weeks inventories climbed.

Inventory Reports

The API said on Feb. 10 that U.S. stockpiles fell 1.99 million barrels in the week ending Feb. 6. The Department of Energy followed on Feb. 11 with a report that said inventories gained 4.7 million barrels over the same period.

The Energy Department is scheduled to release its weekly report today at 11 a.m. in Washington, a day later than usual because of the Presidents Day holiday.

The euro rose from near a three-month low against the dollar on speculation German Chancellor Angela Merkel will signal Europe’s largest economy plans to take action to help ease the financial turmoil in the region.

“Markets seem to be bottoming out for the time being and there’s support this morning from the weaker dollar and some stabilization on the equities side,” said Robert Montefusco, a broker with Sucden Financial Ltd. in London. “The market could easily reverse later when the inventories come out.”

Europe’s single currency climbed to $1.2663 as of 9:52 a.m. in London from $1.2530 late in New York yesterday, when it touched $1.2513, the lowest level since Nov. 21.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net