Energy Finance

Oil prices rose yesterday as the dollar weakened and investors worried that a predicted fall in gasoline supplies could cause refineries to step up crude use. U.S. crude for September delivery rose $1.66 per barrel to settle at $114.53. Prices were volatile during the day, falling below $112 in the morning, then topping $116 in the afternoon before falling back a bit.

Crude jumped after industry analysts predicted a 3 million barrel decline in gasoline stocks for last week and an increase in refinery utilization of 0.4%. A rise in refinery production would drive up demand for raw crude. A decline in gasoline stocks would indicate that refiners had cut production too much. 

Meanwhile, oil was also pushed higher as weaker U.S. economic reports drove the dollar down against the euro and yen. Oil contracts are traded in dollars, and a lower dollar makes them more affordable for foreign investors.

Also, concerns about the Georgia conflict, causing supply disruptions through a vital pipeline link between Europe and Asia, grew after NATO Secretary-General Jaap de Hoop Scheffer said Russian troops in Georgia were not following a cease-fire agreement brokered Monday.

Also adding to supply concerns were comments by an oil official from Libya who yesterday said oil prices would probably rebound. Libya spokespeople also said the oil cartel was not likely to change production levels when it meets next month. 

Hence, while worries about permanently lessening demand have driven oil prices down from a July 11 record high of $147.27, some analysts say crude’s sharp slide may be nearing an end, bottoming out at around $110 to $112 per barrel, before climbing to a new price plateau.

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