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

By Mark Shenk

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

Oil climbed as much as 5.8 percent as the euro strengthened against the U.S. currency on speculation that Europe will take steps to address the financial crisis. Investors purchased commodities as a store of value. A U.S. Energy Department report today is forecast to show that crude-oil stockpiles gained last week as refiners shut units and fuel supplies declined.

“The weaker dollar tends to send people looking for an inflation hedge and at least theoretically will kick up demand overseas because oil will be cheaper for them,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant. “A major reason prices were knocked down into the $30s was the strength of the dollar.”

Crude oil for March delivery rose $1.76, or 5.1 percent, to $36.38 a barrel at 9:33 a.m. on the New York Mercantile Exchange. Prices are down 18 percent this year.

Europe’s currency rose as much as 1.8 percent to $1.2754, its biggest intraday gain in almost two weeks. It touched $1.2513 yesterday, the lowest level since Nov. 21.

The Energy Department report may show that U.S. stockpiles increased 3.2 million barrels last week, according to the median of 15 analyst responses in a Bloomberg News survey. That would be the 19th time in 21 weeks that inventories climbed.

The industry-funded American Petroleum Institute said yesterday that U.S. inventories rose 1.6 million barrels last week to 345.8 million barrels.

Brent crude oil for April settlement increased $1.17, or 3 percent, to $40.72 a barrel on London’s ICE Futures Europe exchange. Futures touched $39.35 yesterday, the lowest since Dec. 31.

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