Reaching an all time high this year and extending this week's gains, the price of crude oil soared more than $78 a barrel on the New York Mercantile Exchange Friday, closing the week on a positive note. Also bouncing back from a recent sell off, natural gas closed 30 cents higher than yesterday's closing price.
Soaring to an intra-day high of $78.75 on the NYMEX Friday, the price of light, sweet crude oil finally settled at $78.53 a barrel. The closing price hit a one-year high, even though U.S. stockpiles have grown. The demand for gasoline has crept higher, but the amount of gasoline in storage is still well above average for this time of year.
Earlier in the day, crude was down from yesterday's closing price due to a strengthening dollar and waning U.S. consumer confidence that could stall any recovery in fuel demand. Additionally, Wall Street fell as Bank of America reported a loss of $1 billion in profits at the close of the third quarter, adding insult to injury to the "dismal" state of personal finances, according to the Reuters/University of Michigan Surveys of Consumers report.
However, as the market was drawing to a close, the dollar weakened once more, forcing the price of crude to rally.
Refiners Hit by Weak Dollar
"Since the dollar is weak and the refiners are cutting back dramatically, it is getting harder and harder to keep the oil prices down," said Phil Flynn, Vice President in Charge of Research for PFG Best. "Even though supplies are above normal, the market is going to go up, and the bears are going to get a break. Since the dollar kept getting weaker, that played into the bull's hands and the poor refiners can't make any profits. They are going to cut back on supply and the demand for higher quality crude oil is going to keep the WTI strong."
Despite the recent rise in the price of crude oil, investors are still hesitant about the economy's recovery. "What the market was keen on earlier in the week is the Dow being back up to 10,000," said Flynn. "Last week's market was looking at the recovery with the glass being half full. Next week, we are looking at it as being half empty."
Many analysts believe the rise in energy prices is all about the dollar, the value of which plunged to a 14-month low on Thursday. "The key thing for oil, now that it has broken out, is the market has to see some proof that it can stop," stated Flynn. "Right now, the bulls have a free hand since the price broke the glass ceiling, so they have the advantage."
Natural Gas Picks up Rally
The price of natural gas settled at $4.781 on the NYMEX Friday, inching towards the $5 mark, and soaring 30 cents higher than yesterday's closing price. The unseasonably cold temperatures have led to a higher price in natural gas, but the recent trend with natural gas prices is sideways.
"We are up and down, up and down in the market with natural gas," the analyst added. "Prices had to get higher to keep producers producing because it is too early in the year for the market to give up production if prices are too low. The spike in price gave the producers an opportunity to do some hedging and they better do it with the supplies being at where they are."
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