At the close of the New York Mercantile Exchange, light, sweet crude oil rose 0.9% or 63 cents higher, to rest at $71.94. Bent crude on the ICE rose three cents to settle at $69.86 per barrel. Oil rose as much as it did because of the weakening of the dollar; however, due to a much larger increase in US gasoline inventories, the price per barrel was unable to go higher.
Oil prices rise as the dollar falls.
Although crude oil prices and dollar strength typically go hand in hand, the relationship between the two has grown much closer due to the weak dollar, but also the desire for an investment that is strong for a recovering economy.
As the dollar weakens and the economy recovers, people move away from investing in the dollar and instead, focus their money on oil. In recent days, the dollar has dropped considerably against the Euro.
“There’s been so much talk about the dollar really going down the tubes, and we’ve seen in the last week the dollar really tanking,” Matt Zeman, president of trading at LaSalle Futures Group in Chicago told The Wall Street Journal. According to him, if the dollar continues to drop, commodities could continue to rise.
Although the dollar is “tanking,” due to the high gasoline inventories, investors have been worried about putting too much money into crude oil. If oil were to cease to come into the United States, the country could last for sixty one days at its current demands. This is ten days longer than the previous five-year average showed.
Another silver lining rested in the fact that gasoline inventories rose by 2.1 million barrels and the distillate stocks, which include diesel and heating oil, increased by two million barrels. Analysts had expected a 1.3 million-barrel drop for gasoline inventories and a 600,000-barrel increase for distillates.