Bloomberg News

Brent Oil Snaps Three-Day Drop as SNB Pledge Weakens Dollar

September 06, 2011

Sept. 6 (Bloomberg) -- Oil rose for the first time in four days in London as a drop in the dollar following Switzerland’s attempt to cap the value of its currency made raw materials more attractive to investors.

Brent futures rose as much as 1.3 percent as the dollar plunged after the Swiss National Bank said it’s setting a minimum franc exchange against the euro. About 61 percent of oil production and 46 percent of natural gas output from the Gulf of Mexico has been shut in because of a storm, according to the Bureau of Ocean Energy Management, Regulation and Enforcement. In New York, prices traded near their lowest in a week amid signs that the country’s crude inventories are rising.

“If the dollar falters that will help oil,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who correctly predicted Brent would be capped at $120 this summer. “In spite of the dire state of western economies, I think demand in China and other emerging nations, the potential for hurricane shut-ins and unrest in the Middle East means prices will go back up.”

Brent for October settlement rose as much as $1.39 to $111.47 a barrel and was at $110.88 at 1:05 p.m. on the ICE Futures Europe Exchange. West Texas Intermediate crude for October traded on ICE in London was up 58 cents at $84.10 a barrel. On the New York Mercantile Exchange, WTI for October delivery was at $84.55, down $2.41 from its Sept. 2 close following yesterday’s Labor Day holiday. The dollar weakened as much as 1.3 percent to $1.4278 against the euro.

Production Halts

About 858,935 barrels a day of oil production in the Gulf of Mexico have been curtailed, the Bureau of Ocean Energy Management, Regulation and Enforcement said yesterday on its website. That compares with 843,223 barrels the day before. About 2.44 billion cubic feet in daily gas production has been shut in, compared with 2.35 billion yesterday.

Crude stockpiles held in floating-roof tanks at Cushing, Oklahoma, the delivery point for WTI oil, rose 2.4 percent on Sept. 1 from Aug. 31, satellite images taken by Longmont, Colorado-based DigitalGlobe Inc. showed. Inventories climbed 850,000 barrels to 35.6 million.

The Energy Department said last week that supplies, including floating and fixed tanks, totaled 33.1 million barrels as of Aug. 26. The Department will release this week’s stockpile report on Sept. 8, a day late because of Labor Day.

U.S. oil futures have slumped 27 percent from this year’s high of $114.83 on May 2 amid concern that a slowdown in world growth will curb demand. The Institute for Supply Management’s non-manufacturing index fell to 51 last month, the lowest since January 2010, from 52.7 in July, according to the median of 59 forecasts in a Bloomberg News survey.

Fighting in Libya, which began in February, has reduced the availability of light, sweet crude, or oil with low density and sulfur content. The country’s output fell to 45,000 barrels a day last month, according to Bloomberg estimates, compared with 1.6 million barrels the nation pumped in January.

--Editors: John Buckley, Raj Rajendran

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net


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