Oil price strikes three-month highEdward Welsch From: Dow Jones...

Oil price strikes three-month high
Edward Welsch From: Dow Jones Newswires August 04, 2010 6:56AM

OIL rose above $US82 a barrel for the first time since May, ignoring a set of disappointing US economic data.

Crude's advance was supported by a weaker US dollar, which makes dollar-denominated oil a more attractive investment for holders of other currencies, and an expectation that supplies will decrease due to the effect of a tropical storm in the Gulf of Mexico last month.

Light, sweet crude for September delivery settled up 1.5 per cent, or $US1.21, at $US82.55 a barrel on the New York Mercantile Exchange, the highest settlement since May 4. Brent crude on the ICE futures exchange settled up recently at $US1.86, or 2.3 per cent, at $US82.68 a barrel.

The oil market shrugged off data on the US housing market and manufacturing sector that suggested a slow down in the US economy, even though the US stockmarket and other commodity prices, including copper, dropped following the release of the economic

The National Association of Realtors' index for pending sales of used homes decreased 2.6 per cent to 75.7 in June, compared with consensus estimates of no change from May. The drop comes as a federal government subsidy for home buyers was removed.

Meanwhile, US factory orders fell by 1.2 per cent in June, compared with consensus estimates predicting a 0.5 per cent decline, and providing another sign the US economy may be weakening.

"It's a little bit of a surprise that we didn't see some softening after that data," said Peter Donovan, vice-president of Vantage Trading in New York. "It's funny how the market is fickle about what statistics it chooses to focus on."

One statistic the oil market focused on was the weakening US dollar, which traded at $US1.3229 against the euro, compared with $US1.3180 in the previous session.

Mr Donovan also said traders were expecting crude oil supplies to drop in the latest weekly inventory report from the Department of Energy, due to the effect of Tropical Storm Bonnie which blew through the Gulf of Mexico at the end of last month.

Several oil installations were evacuated during the storm as a precautionary measure and import shipments may have been delayed, which would bring down supplies.