Oil gained $2 this week as congressional Democrats and President George W. Bush’s administration reached an agreement on the plan. Prices also rose because of President-elect Barack Obama’s pledge to enact the biggest U.S. public works program in half a century.
Crude oil for January delivery rose $1.08, or 2.6 percent, to $43.15 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures, which have dropped 55 percent this year, are heading for the biggest annual decline since trading began in 1983, as global economies falter.
House Speaker Nancy Pelosi said she plans to have a vote on the auto bill today in the House, where Democrats have a large enough majority to make passage likely.
The dollar dropped versus the euro, adding support to commodity markets. A weaker U.S. currency increases demand for commodities as a hedge and makes raw materials cheaper for buyers with euros, yen or sterling. The dollar weakened to $1.3019 per euro from $1.2927 yesterday.
Oil also rose after Russia signaled it may coordinate an output cut with OPEC next week to end the five-month, $100 slump in prices.
Energy Minister Sergei Shmatko said Russia will announce proposals for reducing output by Dec. 17, when OPEC meets, Interfax reported. The group, source of more than 40 percent of the world’s oil, may trim production by as much as 2.5 million barrels a day, next week, billionaire hedge-fund manager Boone Pickens said yesterday.
Shmatko said he had spoken on the phone to the president of the Organization of Petroleum Exporting Countries and that the group is preparing significant” output cuts, Interfax said. Russia is the world’s second-largest exporter after Saudi Arabia. Norway, the next biggest non-OPEC exporter, has no plans to cut output, the petroleum ministry said.
OPEC should make a substantial” output cut when it meets on Dec. 17 in Algeria, Shokri Ghanem, Libya’s top oil official, said on Dec. 8. Oil has tumbled 29 percent since the group announced a 1.5 million-barrel-a-day supply reduction on Oct. 24.
OPEC will work it back up to $100,” Pickens said yesterday in an interview in New York. It will all be determined by the global economy. If you get a recovery in the global economy, you will get it back up.”
Prices dropped earlier after the U.S. government released a report that showed inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, climbed last week as refineries increased operating rates and demand dropped.
Gasoline stockpiles rose 3.7 million barrels to 202.7 million barrels in the week ended Dec. 5, the Energy Department said today in a weekly report. Distillate inventories climbed 5.6 million barrels to 130.6 million. Gasoline supplies were forecast to fall 400,000 barrels and distillate supplies by 1.5 million barrels, according to a Bloomberg News survey.
Inventories of crude oil rose 392,000 barrels to 320.8 million, the department said. Supplies were forecast to increase by 1.3 million barrels, according to the median of 14 responses in the Bloomberg News survey.
Refineries operated at 87.4 percent of capacity, up 3.1 percentage points from the week before.
Brent crude oil for January settlement increased 74 cents, or 1.8 percent, to $42.27 a barrel on London’s ICE Futures Europe exchange.