Crude rises the most in three weeks

Prices pare initial weakness and rise on hopes of strong demand

Crude-oil futures shed their initial weakness and ended substantially higher on Tuesday, 30 August 2011 to end at their best level in nearly three weeks. Crude price at Nymex were under pressure earlier following weak consumer confidence data. Then, prices gave up earlier weakness and rose as U.S. equities rose and brought some optimism about oil demand to the market. The dollar turning weak also aided in rising crude prices.



Sweet light crude for October delivery added $1.63 (1.9%) to settle at $88.90 a barrel on the New York Mercantile Exchange on Tuesday. During intra day trading it rose to a high of $89.21 a barrel.

US stocks extended their early morning slide in response to an abysmal Consumer Confidence Index for August. The Index had been generally expected to ease to 52 from just above 59, but slumped to 44.5, which is the worst reading since April 2009. It is suspected that the worse-than-expected reading was the result of stock market volatility, slow job growth, and concerns about the pace of the overall economic recovery.

In addition, at the August meeting, the FOMC said it thought that short-term interest rates would remain near zero until mid-2013. That boosted gold, which went on to hit a string of records earlier in the month.

In the currency market, the U.S. dollar pared gains against major currencies after minutes from the Federal Reserve's policy meeting. The dollar held earlier gains after a report showed U.S. home prices unexpectedly rose in June from May.

The weekly inventory report on crude expected tomorrow is expected to show crude-oil supplies falling by around 1.2 million barrels as low imports more than offset the release of oil from the strategic petroleum reserve. Gasoline stocks are expected to drop by 1.1 million barrels, while distillates stocks are seen rising by 1.1 million barrels.

Among other energy products on Tuesday, September gasoline rose 9 cents to end at $3 per gallon. Heating oil for the same month advanced 6 cents, or 2%, to $3.07 a gallon. Both the products settled at their best levels in August 2011.

Natural gas for September gained 8 cents, or 2.1%, to $3.91 per million British thermal units on Tuesday.