NYMEX Crude Up $1.15/Barrel as Weaker Dollar Spurs Short-Covering


"A turnaround in U.S. equity markets late Wednesday. . .appeared to put a floor in petroleum prices."

NYMEX August crude futures on CME's Globex system were $1.15 higher at $61.29/barrel with an upturn in equity markets and a weaker dollar spurring short-covering after six consecutive sessions of price declines.

A turnaround in U.S. equity markets late Wednesday as a result of a $19 billion 10-year note auction appeared to put a floor in petroleum prices. S&P 500 futures were 7.6 points higher at 881.330 prior to the start of trading in New York while the US Dollar Index on ICE was 71.6 points lower 81.05.

The bid-to-cover ratio--the amount of securities bid for compared to the amount the US Treasury was offering--for the note auction was an exceptionally high 3.28. The 10-year notes were auctioned at the high yield of 3.365%, but that was down from where the securities were trading prior to the auction which was 3.4%.

Concerns about the US being able to attract buyers for securities given the amount of money the US is printing has not proven to be a problem.

"The G8 meeting is wrapping up and there have been no surprises to speak of," chief foreign exchange strategist at Brown Brothers Harriman, Marc Chandler, said in a note to clients. "After rejecting initiatives by the Chinese and Russians (according to news reports) to formally discuss reform of the international monetary order to reduce the role of the dollar, the G8 draft indicates support for a 'stable' and 'well-functioning' international monetary system."

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