Commodity Daily News

Falling Dollar Supports Rising Crude Prices

Dollar weakness gave support to spot crude oil prices as the commodity strengthened by 1.8% yesterday, climbing to their highest level since the natural disaster in Japan. Increased fighting in Libya and further protests in the Middle East has kept the crude market in fear of supply disruptions.

Yesterday, spot crude oil prices finished the day near their high at $104.99 after opening the day at $103.84.

Increased fighting in Libya along with the crash of a US F-15 fighter plane raised concerns of a prolonged conflict in Libya which would limit the return of Libyan supplies to the market.

Also adding to tensions was a defection of Yemen army brass to opposition parties, which has raised fears of turmoil in Yemen. Despite Yemen's lack of being a major crude oil producer, its proximity to Saudi Arabia who is a major supplier of crude oil will likely increase tensions in the region.

Today US weekly crude oil inventories will be released and expectations are for a rise of 2.0M barrels. The previous week saw an increase of 1.7M barrels. While Libya is not a supplier of crude oil to the US, it does supply significant amounts to Europe, particularly Italy. A larger than expected draw-down in US crude oil supplies should be another reason for crude oil bulls to continue with yesterday's buying.