Light crude oil trades higher on weak dollar

Light crude oil futures prices ended trading on Tuesday above $71 a barrel after the posting the biggest single day rise since August 19th on a oil buying spree spurred by weakness in the US dollar.

Light, sweet crude oil futures for October delivery on the New York Mercantile Exchange settled up $3.08, or 4.5%, at $71.10 a barrel, the highest price since August 28th. NYMEX prices were poised for a rebound after dropping $4.72 a barrel, or 6.5% last week ahead of the US Labor Day holiday weekend on Monday.

“It’s been one of the major trades of the past year: weak dollar, buy commodities,” said Andy Lebow, senior vice president at MF Global. “People have been piling into this trade and today it looks like they are piling on to that.”

OPEC meets later today in Vienna to review oil output policy, but traders said they don’t expect surprises. “The market has known for some time that OPEC is not going to change its quotas,” said Lebow, as comments by several OPEC officials underscored that belief.

Ali Naimi, oil minister of OPEC kingpin Saudi Arabia, said the oil market is in “very good shape” and both producer and consumer nations are happy with crude prices between $68 and $73 a barrel.

Goldman Sachs said in a report it expects mountainous US inventories of distillate fuel (diesel fuel/heating oil), at a 28-year high at the end of August, to decline in coming months, improving the supply/demand outlook. The bank repeated its forecast for $85 a barrel crude oil by year end.

Tags:  light oil prices, NYMEX