Retaining gains made yesterday on the New York Mercantile Exchange, crude futures closed with positive movement above $78 on Tuesday as the market's financial concerns ebbed and the dollar extended its losses against the euro.
The price of light, sweet crude oil for January delivery moved slightly higher during trading on the NYMEX today, ultimately ending the session at $78.37 a barrel, a gain of $1.09 from yesterday's final price tag.
Although economic developments in the U.S. such as better-than-expected resale home figures helped to further ease the tension created from Dubai's delayed billion-dollar debt repayment, worry about the Iranian hostage situation also added support to the market.
China's Manufacturing Data Lifts Market's Sentiments
According to Reuters, two business surveys reflecting China's strengthening economy provided the impetus for investors to put their concerns over Dubai behind them and head back into riskier markets.
The reports indicated that an index produced for HSBC crested a new record high for November, while another official index remained unchanged at an 18-month peak.
"If I had to narrow it down to the most important reason for crude's gain today, I'd have to say that it was the Chinese manufacturing numbers that came out this morning," noted Phil Flynn, vice president in charge of research for PFGBest in Chicago.
He explained, "When the Chinese showed that their manufacturing sector last month hit the highest level in five years, you have to say that the demand for oil being driven by Asia is still going to be pretty strong."
Also spurring today's rally in oil prices, upbeat euro zone data chased away the U.S. dollar's safe-haven appeal.
"So much of the value of a barrel of oil is directly related to the value of the dollar," Flynn underscored. "I think everyone realizes that the price of oil wouldn't be this high if it weren't for the fact that we have the global economic stimulus driving the price and the weakness in the dollar."
'Hard Road Ahead' for Natural Gas Market
Slipping further on the NYMEX Tuesday, natural gas futures for January delivery settled once more below the $5-threshold of its current trading range to $4.762 per thousand cubic feet.
"Based on what the natural gas market has done this week, you have to think that what we saw last week was a lot of short covering when prices broke above $5," Flynn said.
"With the expectation of another injection into supply and with temperatures still relatively mild, natural gas has a hard road ahead if it's going to maintain these higher prices -- we need to see demand pick up and we need to see it quick," the analyst stressed.
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