Crude Jumps Above $111 As Dollar Weakens

New York, NY (AHN) - Crude oil prices jumped back above $111 a barrel in New York after the news spread that the supplies could be disrupted from the U.S. and Nigeria.

Additional boost to the prices came from the weakening of the U.S. dollar in the global markets as the speculations on the condition of corporate earnings reports indicate that the U.S. economic prospects have worsened.

There have been a rising concern over the state of the U.S. economy as the Group of Seven finance ministers expressed fears over the global economic prospects that have weakened by the losses incurred in the financial sector.

A light sweet barrel of crude oil for May delivery traded at $111.16 a barrel, up by $1.02 in electronic trading on the New York Mercantile Exchange, after it was recorded at $110.14 a barrel on the New York Mercantile Exchange on Friday.

Meanwhile, the weakening U.S. dollar also added to the rise of crude oil in the global markets.

"Traders have bought oil in response to lower interest rates and a weaker dollar," Cameron Hanover analyst Peter Beutel, told Thomson Financial news agency.

"The disconnect between the bearish implications of a weaker economy and the price, which has gained to a large extent on the back of the anticipated Federal Reserve reaction to that growing economic weakness, has grown and is growing."

Crude had jumped to a record price of $112.21 a barrel on April 9 in New York, following a report from the U.S. authorities on the declining amount of oil stockpiles. Over the period of one year, prices of crude oil have gone up by 74 percent.

The U.S. dollar declined by 0.2 percent against the 15-nation European currency to $1.5857 per euro, while the dollar plunged against the Japanese currency to 100.74 yen per dollar, compared to 100.90 yen in New York on Friday.

"The G-7's warning against excessive currency fluctuations was interpreted by the market as saying the dollar's fallen way too much and too fast," Victor Shum, an energy analyst with Purvin & Gertz in Singapore, told The Associated Press news agency on Monday.

"This comment may underpin the U.S. dollar in the near term and thereby reduce the interest of financial investors to pile money into oil and other commodities," he added.

The disruption in the U.S. came from the shut down of The Capline system since April 11 as a leakage was detected in Tennessee.

The pipeline system, which runs from the Gulf of Mexico to the Midwest, provides crude to refineries like BP Plc's 420,000 barrel-a-day plant in Whiting, Indiana, and Marathon Oil Co.'s 239,000 barrel-a-day facility at Catlettsburg, Kentucky, according to Bloomberg news report.

"There's no gasoline demand to speak of right now, otherwise there would be a big reaction to the Capline shutdown," Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut, was quoted saying in the news report.

While, oil production of 5,000-barrels-a-day was stopped at some sites by Eni SpA's Nigerian venture after some oil wells caught fire on April 12 near the Beniboye area in the Delta state, according to the Rome-based company on Monday.