Will dollar devaluation and China demand cause higher oil prices?
*The Wall Street Journal, by Claire Rangel, January 11, 2009
”Crude futures are at 15-month highs Monday, buoyed by record crude import demand into China and greater investment flow into oil, in part due to a weaker dollar.
Light, sweet crude for February delivery recently traded 82 cents, or 1%, higher at $83.57 a barrel on the New York Mercantile Exchange. It touched an intraday high of $83.95 a barrel. Brent crude on the ICE futures exchange traded 74 cents, or 0.9%, higher at $82.11 a barrel.
Confidence in China’s ability to drive oil consumption growth was underscored by China reporting record crude import levels for December over the weekend. Imports hit 21.26 million metric tons, equivalent to 5.03 million barrels a day, preliminary data from the General Administration of Customs showed.
Meanwhile, the dollar was trading at its lowest level against the euro in over three weeks as investors moved out of the low-yielding currency and into more riskier, assets, including oil.
Last week’s rise in U.S. jobless totals raised prospects that the U.S. could continue to keep interest rates low for a longer period of time, taking support away from the dollar.
Oil prices also tend to rise on a weaker dollar as this makes the commodity cheaper to purchase for holders of other currencies.”
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