Oil ends over $50 a barrel

The greenback gets hit hard as the Federal Reserve announces it will spend another $1 trillion, driving crude prices higher.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Catherine Clifford, CNNMoney.com staff writer

crudeoil.mkw.gif
Click on the chart to see prices of other commodities.
What progress is the Obama administration making toward ending the recession?
  • It's succeeding
  • The recovery is too slow
  • It's not helping at all

NEW YORK (CNNMoney.com) -- Oil prices jumped Thursday, closing above the $50 threshold for the first time since late November, as the dollar weakened significantly after the government announced it would spend another $1 trillion.

Crude for April delivery settled up $3.47 a barrel, or 7.2%, to $51.61. Earlier in the session, oil climbed as high as $52.25 a barrel in electronic trading. The last time oil closed above $50 a barrel was Nov. 28, nearly 4 months ago, when oil settled at $54.43.

Friday is the last day of trading on April contracts, according to the New York Mercantile Exchange Web site. Starting Monday, the May contract becomes the so-called "front-month" contract (see correction).

"Obviously we have an extremely weak dollar today and that is the main catalyst for all commodities going up today," said James Cordier, founder of OptionSellers.com. The sinking dollar "is the lion share of oil's rally today for sure," added Cordier.

The Federal Reserve announced Wednesday that it would buy $300 billion of long-term Treasurys over the next six months in an effort to get the pipelines of credit moving more freely. In addition, the government will buy an additional $750 billion in mortgage-backed securities in an effort to lower mortgage rates.

The government's commitment to spend another $1 trillion, put pressure on the greenback. When the government adds to the money supply, that raises fears of inflation. Crude oil is bought and sold in dollars around the globe, and therefore, when the greenback loses value, the price of oil increases.

The weaker dollar pushed the price of oil up Thursday, even as the global recession has cut sharply into global demand.

"Slowing demand and rising supply might not matter as the Fed prints trillions of dollars to buy back treasury securities and create an artificially lower yield driving down the value of the dollar and driving up the priced in cheaper dollar oil," said Phil Flynn, senior market analyst at Alaron Trading, in a research note.

Wednesday, the Energy Information Administration said stockpiles of gasoline increased significantly, where analysts were expecting a decline in stockpiles. Supplies of crude also increased in the most recent week.

In the face of falling demand and rising supplies, the Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - have pledged to limit production quantities. "OPEC has cut back about as much production as is possible at this time," said Flynn.

Going forward, whether oil prices sustain Thursday's rally depends on the economy and the dollar. "What we are going to do now is key off of global stock markets," said Cordier. If stock markets show optimism, that would be a signal to the oil market that the economy could be healing, and with it, demand for oil.

"If stock markets hold these gains through the weekend and into Monday, then crude oil has another leg up," said Cordier. "The stock markets are the best barometer to show economic growth in the future," he added.

The movement of the dollar in coming trading sessions will also have an impact on oil. If the dollar gains strength early next week as investors refocus on economic weakness in the euro zone, that would again weigh on oil prices, according to Cordier.

Meanwhile, retail gasoline prices ticked higher. The national average price for a gallon of regular unleaded gasoline increased to $1.93, up 1.3 cents from the previous day's price of $1.920, according to motorist group AAA's Web site.

Correction: An earlier version of this story incorrectly stated that Thursday was the last day of trading for the April contract. Friday is the last day of trading for the April contract. CNNMoney.com regrets the mistake. (Back to story)  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.