Oil prices surge above US$70 in another volatile day of trading as dollar falls

Source: Agencies  |   2008-11-5  |     ONLINE EDITION

OIL prices surged above US$70 a barrel yesterday in the final hours of a two-year US presidential campaign, mirroring global stock markets that strengthened from Asia to Europe. A weaker dollar helped too.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said the weaker dollar in particular likely attracted some people to oil.

Ritterbusch and other analysts also said there were reports that Saudi Arabia had already informed customers it was slashing production.

Light, sweet crude for December delivery rose US$6.62 to settle at US$70.53 a barrel on the New York Mercantile Exchange after rising as high as US$71.77. In London, December Brent crude rose US$5.96 to settle at US$66.44 on the ICE Futures exchange.

Investors see commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.

Oil prices have fallen roughly US$80 from their July peak around US$147. In October alone, crude prices tumbled 32 percent, the largest decline in Nymex history.

At home, the Dow Jones industrial average jumped about 300 points despite a new Commerce Department report that said factory orders fell 2.5 percent in September from August, much worse than analysts had predicted.

As the pace of industry has slowed and businesses consume less crude, the price of oil has fallen US$30 from just over a month ago. The price of retail gasoline dipped below US$2.40 gallon (63 cents a liter) for the first time since early last year.

Crumbling home prices, a shaky job market and gasoline that spiked above US$4 per gallon (US$1.07 a liter) have dramatically changed how Americans use fuel. While plummeting gas prices have certainly been welcomed by consumers, much of that exuberance has been lost amid a host of economic problems.