Crude oil spikes to 82 dollars in NY

October 22, 2009 08:02:43 AM

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Oil prices spiked Wednesday to a one-year peak of 82 dollars amid plunging US gasoline or petrol reserves and the weakening greenback.

New York's main contract, light sweet crude for December delivery, rose 2.25 dollars higher to end at 81.37 dollars after hitting 82.00 dollars, prices last seen in October 2008.

London's Brent North Sea crude for December delivery climbed 2.45 dollars to 79.69 dollars.

Aside from the weak dollar, the market turned bullish after a US Department of Energy (DoE) weekly inventory report said American gasoline reserves sank 2.3 million barrels in the week to October 16.

That was more than the 800,000 barrels drop expected my most analysts.

For gasoline, it was "another bigger than expected draw as imports and production stay very low," analysts at Morgan Stanley said in a report.

"Demand is a fly in the ointment for the bulls, but distillate demand may be better than it looks with exports overstated," they said.

Andy Lipow of Lipow Oil Associates said that the dollar, which slumped past the aginst the euro to allow the single currency to top 1.5000 dollars -- a level last seen on August 11, 2008 -- "precipitated some buying in the commodities market, not only in oil."

The falling greenback makes dollar-priced oil cheaper for buyers holding stronger currencies, and therefore tends to stimulate crude demand and prices.

Torbjorn Kjus, analyst at DnB NOR Markets, described the sharp gasoline drop as "bullish" -- indicating that it was likely to push oil prices higher.

The DoE's weekly report is a key focus for the market because the United States is the world's biggest energy consuming nation, followed by number two China.

A weak dollar and an upbeat mood about the global economic recovery are driving the recent surge in crude prices, according to oil industry watchers.

Oil prices had finished Tuesday in negative territory after downbeat data from the ailing US property sector.

OPEC is meanwhile ready to invest funds to aid the production of oil amid a recovery in energy demand and rising prices for crude, the cartel's chief Abdalla Salem El-Badri had said on Tuesday.

El-Badri, speaking at a London energy conference, also argued that 60-70 dollar oil would not be enough to allow adequate investment levels by OPEC, which pumps 40 percent of the world's oil.

Oil prices tumbled from historic highs of more than 147 dollars in July 2008 to about 32 dollars in December because of the global recession but have since risen on recovery hopes.