Oil prices resume climb as dollar weakens against the euro and Dow Jones Average passes 11,000

Friday, October 8, 2010

Gasoline pump prices still rising with higher oil

NEW YORK — Drivers across the U.S. paid more for gas every day this week, and it looks like they could pay a little more before pump prices level off.

The average price of a gallon of regular hit $2.782 on Friday, according to AAA, Wright Express and Oil Price Information Service. That’s 1.4 cents higher than Thursday and 31.4 cents above a year ago. Gas prices haven’t been this high since last spring. Just a week ago, the average price was $2.692.

The price of oil has been around $80 a barrel or more for over a week. Crude’s been rising as the dollar has weakened against the euro. Since oil is priced in dollars, it becomes more attractive to foreign investors as the dollar falls. Higher oil prices mean refiners have to pay more for crude to make gasoline and other refined products.

Benchmark crude rose 99 cents to settle at $82.66 a barrel on the New York Mercantile Exchange.

It’s not clear how much longer oil prices will continue to rise in the short term. Supplies remain abundant and energy analysts Cameron Hanover say crude is overbought. Oil rose above $84 a barrel on Thursday only to settle below $82 as the dollar briefly rose against the euro.

The dollar’s been falling for the past month because investors expect the Fed to buy government bonds to boost the U.S. economy. That should weaken the dollar further.

“It is abundantly evident that the Fed wants the U.S. dollar lower,” Cameron Hanover wrote in a note to investors. “The problem from our perspective is that a telegraphed intention to pursue a weaker dollar is tantamount to pursuing higher oil prices. And those are neither good for the U.S. economy nor individual consumers.”

The economic news was mixed Friday, but positive enough to help push the Dow Jones Industrial Average above the 11,000 mark. The NASDAQ and the S&P 500 were higher as well. While the Labor Department said the economy lost 95,000 jobs, the Commerce Department said wholesale inventories and sales rose in August. Alcoa kicked off the quarterly earnings season Thursday afternoon with an outlook for higher aluminum prices and growing global demand for the metal.

In other Nymex trading gasoline gained 3.32 cents to settle at $2.1512 a gallon, heating oil rose 3.01 cents to settle at $2.2819 a gallon and natural gas picked up 3.4 cents to settle at $3.651 per 1,000 cubic feet after dropping to a 52-week low of $3.583 earlier in the session.

In London, Brent crude rose 60 cents to settle at $84.03 per barrel on the ICE futures exchange.

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