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Earl's Gulf run helps oil
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September 10, 1998: 5:34 p.m. ET
Silver and gold ride weak dollar, while black gold gains in wake of hurricane
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NEW YORK (CNNfn) - Crude oil futures spurted higher Thursday after a report showed last week's Hurricane Earl led to a surprisingly big drop in refined oil inventories.
The Nymex crude oil futures contract for delivery in October rose 55 cents to settle at $14.67 cents a barrel, its highest level in a week.
Market traders said other climatic rumblings in the Gulf of Mexico, not far from Earl's path, could further deplete oil inventories in the near-term. Tropical Storm Frances lurks in the Gulf and could also tie-up imports and refinery activity.
Late Wednesday, the American Petroleum Institute reported that Hurricane Earl tied up imports, forcing consumers to tap reserves of oil.
API said the draw-down from those stocks was 6.7 million barrels, a level that took one analyst by surprise.
"Inventory levels were used much more than expected," said Mike Rothman, energy futures analyst with Merrill Lynch. "Those were much larger stock draws than we had anticipated."
And, he said, "refinery activity curtailments were much more than expected because of Hurricane Earl."
The draw-down suggests oil purchases will increase to refill what had been lost during the storm.
But despite those seemingly bullish signs for crude oil prices because of the weather, weak fundamentals should still put pressure on the market, Rothman said.
"We may get some slightly higher prices," he said, "but given the amount of supply out there it's difficult to make the case that prices will go much higher."
Nymex traders said that among secondary drivers for oil prices Thursday included a call by Kuwait for OPEC's Mideast producers to meet to discuss the low oil prices.
Precious metals shine brighter
In one of many other depressed commodity markets, precious metals futures rose sharply Thursday in the wake of new weakness in the U.S. dollar.
The Comex gold futures contract for delivery in December, the most active month of trading, shot up $6.40 to settle at $293.80 an ounce.
"Gold put in a pretty good performance," David Rinehimer, metals analyst with Salomon Smith Barney, said. "When the dollar has been strong, commodity prices have been weaker, and when the dollar has weakened there has been a rebound."
A weaker dollar gives many nations better buying power when they shop in the market for raw materials.
Fellow precious metal silver climbed to its highest levels in more than two weeks. The Comex silver futures contract for December delivery gained 10 cents to $5.05 per ounce, its highest close since Aug. 25.
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