Oil near $83 as dollar drops after G-20 meeting
Monday, October 25, 2010
SINGAPORE (AP) -- Oil prices jumped to near $83 a barrel Monday in Asia as investors bid down the U.S. dollar after finance leaders at the weekend G-20 meeting agreed to avoid a so-called currency war.
Benchmark oil for December delivery was up $1.08 to $82.77 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.13 to settle at $81.69 on Friday.
Finance ministers and central bank governors from the Group of 20 major advanced and emerging nations pledged Saturday to not aggressively devalue their currencies in a bid to keep their exports competitive, but the meeting failed to produce any detailed policy initiatives.
Investors were interpreting the outcome of the G-20 meeting as a sign that policymakers will tolerate a weaker dollar without seeking to retaliate, said Victor Shum, an energy analyst with consultancy Pervin & Gertz in Singapore.
The euro jumped to $1.4045 from $1.3952 on Friday while the dollar plunged to 80.54 yen from 81.50 yen.
Commodities such as crude often rise when the dollar falls because they become cheaper to investors holding other currencies.
Crude will likely trade between $80 and $83 until the Federal Reserve details possible measures to spur economic growth, known as quantitative easing, at its meeting next week, Shum said.
Some analysts argue that the price of oil is the key to whether Asia maintains its strong economic growth.
If crude rises much higher it will spark inflation, which regional policymakers will seek to quell with interest rate hikes and capital controls, which would in turn trigger an economic slowdown, said Frederic Neumann, co-head of Asian Economics Research at HSBC.
"Energy prices are crucial," Neumann said. "If oil heads to $100 per barrel, or higher still, you'll know that it's back to 2008 and another bust."
In other Nymex trading in November contracts, heating oil rose 2.29 cents to $2.275 a gallon and gasoline gained 1.94 cents to $2.083 a gallon. Natural gas fell 3.2 cents to $3.30 per 1,000 cubic feet.
In London, Brent crude rose 99 cents to $83.95 a barrel on the ICE Futures exchange.