Oil Rises to Highest Since November on China Manufacturing Gain

Source:

"All the attention is on the weaker dollar and macroeconomic sentiment."

Crude oil rose to the highest level since November as China's manufacturing expanded, signaling that fuel demand in the world's second-biggest energy-consuming country may increase.

Oil advanced as much as 3% after China's Purchasing Manager's Index showed that manufacturing in May climbed for a third month. Energy and metals also gained after the U.S. dollar fell to its lowest against the euro since December, increasing the appeal of commodities as an alternative investment.

"This is all about recovery expectations," said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. "It looks like manufacturing is recovering in a number of countries, which is feeding into the belief that the worst is behind us. It doesn't hurt that the dollar is at the lowest level of the year."

Crude oil for July delivery rose $1.25, or 1.9%, to $67.56 a barrel at 9:58 a.m. on the New York Mercantile Exchange. Futures touched $68.29, the highest since Nov. 5. Prices are up 51% this year.

The dollar declined 0.3% to $1.4203 per euro, from $1.4158 on May 29. The U.S. currency earlier touched $1.4246, the weakest level since Dec. 29.

"All the attention is on the weaker dollar and macroeconomic sentiment," said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. "The market has advanced a long way on flimsy fundamentals and may pause for breath or see a setback now."

BNP Paribas raised its West Texas Intermediate crude-oil forecast for 2010 by $12 a barrel, to an average of $75, according to a report today by analyst Harry Tchilinguirian in London. The West Texas grade is the U.S. benchmark and is traded in New York.

"Investors are hopeful that the economy will be buoyant during the second half of the year, which will lead to increased crude-oil demand," said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. "There are also hopes for a strong driving season."

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe