Oil Rises, Heads for Third Weekly Gain, After Goldman Forecast
Crude oil rose in New York, poised for a third weekly gain, after Goldman Sachs Group Inc. said prices may reach $85 a barrel by the end of the year as demand recovers and supplies shrink.
Oil surged to a seven-month high yesterday and gasoline climbed after the bank increased its year-end forecast from $65. The dollar’s drop over the past six weeks has boosted crude prices as investors buy commodities as an inflation hedge.
“It’s the funds that are pushing the market higher,” said Jonathan Kornafel, a director for Asia at options trader Hudson Capital Energy in Singapore. “When everyone reads the same report and comes to the same conclusion, then you’re going to have the market moving in one direction. The general trend is for the dollar to get weaker and for crude to get stronger.”
Crude oil for July delivery rose as much as 71 cents, or 1 percent, to $69.52 a barrel on the New York Mercantile Exchange. It was at $69.38 a barrel at 2:10 p.m. Singapore time. Yesterday, the contract rose $2.69 to $68.81, the highest settlement since Nov. 4. Prices are up 4.6 percent this week.
The U.S. Dollar Index, which values the greenback against a basket of international currencies, has dropped 5.5 percent since May 7, while crude has gained 22 percent.
“It really has been driven by pretty strong inflows from funds and that’s been encouraged by quite significant weakness in the dollar,” said Toby Hassall, an analyst at Commodity Warrants Australia Pty in Sydney. “Given the momentum crude seems to have at the moment, $85 as a high for 2009 doesn’t seem unreasonable.”
From Bloomberg News.
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