Oil Soars Above $77 on Weak Dollar, Rallying Stocks
Lifted by a weakened greenback, crude oil futures rallied to just above $77 a barrel on the New York Mercantile Exchange Tuesday due to revived risk appetite in both the equities and commodities markets.
As the euro trumped the dollar in its biggest one-day gain against the U.S. currency, the price of light, sweet crude oil for March delivery surged nearly $3 higher than Friday's final price tag, closing in bullish territory at $77.01 a barrel.
Conversely, natural gas spot prices at the Henry Hub for March delivery reversed last week's upward momentum on the NYMEX to settle back down to $5.31 per thousand cubic feet.
Helping to stoke investors' buying enthusiasm on Wall Street today, the New York Federal Reserve reported that the state's manufacturing activity has increased so far this month. Specifically, the "Empire State" general business conditions index climbed to 24.91 in February, compared to 15.92 the previous month.
Overall, analysts point to both the dollar's negative movement and rising stocks as the primary factors for today's higher oil price.
"Crude's rally seemed to come from the sell off in the U.S. dollar index," said Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska.
"With the dollar under a great deal of pressure and the stock market posting a strong rally today, those two factors combined brought some money back into commodities," the analyst reiterated.
Newsom also noted that the contango in the April/May futures spreads have started to tighten, indicating commercial buying in the crude oil market that may be seasonal in nature.
"When I look at my season index chart," Newsom explained, "crude oil tends to put in its low around the second week of February and then posts a 34% gain up through the second week of July. So whether or not there was some of that [seasonal] buying coming in betting on the idea that this market's going to skyrocket, that certainly could have been at play today," the analyst contended.