Crude Oil Rises for First Time in Three Days on Weaker Dollar

By Grant Smith

June 16 (Bloomberg) -- Crude oil rose for the first time in three days as the dollar weakened against the euro and before a report on stockpiles in the U.S.

The U.S. Energy Department will probably say tomorrow that crude stockpiles dropped 2 million barrels last week, according to a Bloomberg survey. Oil lost 2 percent yesterday, extending its decline from last week’s seven-month high of $73.23 a barrel as a stronger dollar made commodities less appealing as a currency hedge.

“The pullback in the dollar is supporting all commodities,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “Sentiment remains positive, but it’s likely the market will consolidate ahead of the U.S. inventory data tomorrow.”

Crude oil for July delivery rose as much as $1.50, or 2.1 percent, to $72.12 a barrel in electronic trading on the New York Mercantile Exchange. It traded for $71.70 as of 12:52 p.m. London time.

U.S. crude oil supplies probably dropped as refiners ramped up production and boosted stockpiles of gasoline and heating oil, a Bloomberg News survey showed. Inventories are 11 percent above the five-year average for this time of year.

Gasoline supplies probably rose 550,000 barrels in the week ended June 12 from 201.6 million the previous week. All of those surveyed said supplies climbed. Stockpiles during the same week last year fell 1.2 million barrels amid the peak motor fuel demand season in the U.S.

Bleak Picture

“The economic picture still looks very bleak,” said Andy Sommer, analyst at Elektrizitaets-Ges Laufenburg AG in Dietikon, Switzerland. “Most global economies are still in recession inventories are extraordinarily high, so we expect prices to correct down to the mid-to-low $60s.”

Brent crude for August delivery rose as much as $1.58, or 2.3 percent, to $71.82 a barrel on London’s ICE Futures Europe exchange. Yesterday the contract lost $1.56, or 2.2 percent, to $70.24 a barrel.

Iranian opposition supporters plan a fourth day of protests in Tehran against President Mahmoud Ahmadinejad’s re-election, after seven people were killed in violence at a rally in the capital yesterday. Iran is the world’s fourth-largest crude oil producer.

“For the time being, the Iranian situation seems to be neutral,” said Edward Meir, analyst with MF Global Ltd. in Connecticut. “Although the oil markets were unimpressed by the frenzied weekend developments,” events seem “to have picked up a gear over the past 24 hours, in that the size of the opposition protests have become significantly larger.”

The U.S. dollar dropped for the first day in three against the single European currency, losing 0.9 percent to $1.3911 as of 12:50 p.m. London time. Declines in the U.S. currency heighten the appeal of dollar-priced assets that can be used to hedge against inflation, such as crude.

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