Oil hits 6 week high

Posted Oct 12th 2009 3:50PM by Michael Fowlkes
Filed under: Major Movement, Forecasts, Market Matters, Money and Finance Today, Commodities, Oil, Recession

Oil prices hit a 6 week high today, as cold weather gripped most of the country.

Over the weekend the nation was hit with a cold front that reminded oil traders that the high demand winter season is on its way, and could help reduce a lot of the oversupply that the market is currently looking at.

The National Weather Service said that demand for heating oil this week would definitely be above normal, pushing oil prices as high as $73.84 earlier in the session, and they are currently sitting at $73.67, up $1.90 on the day.

Cold weather is not the only factor leading to oil's recent run up, as concerns of a weakening U.S. dollar are also playing a major role in the crude's attractiveness lately. Since March, the U.S. dollar has lost about 14% and helped pushed oil prices up nearly $21 a barrel during the same time period.

Since oil is a hedge against inflation, any weakness in the dollar will bring out oil buyers, and the belief is that the dollar will remain weak for some time to come, and will probably continue to devalue against the other major currencies around the world.

Gold is also another natural hedge against a falling dollar, and as expected gold prices were also moving higher today, trading up as high as $1,058.40 an ounce, and is currently up $9.70 to $1,057.50.

Also helping out oil is what appears to be a strong start to the earnings season. So far we have seen pretty good results, and the belief is that an improving economy will help boost demand, and send prices even higher. This week we will get a lot of earnings reports, and if we continue to see strong numbers you can be sure that oil will continue to inch higher.

We also have political reasons for oil's jump. North Korea is back in the news, reportedly test firing 5 missiles today off its eastern shore. North Korea's move is mostly likely an attempt to lure America into bi-lateral talks with the country, but Secretary of State Hillary Clinton stated that America was "unaffected by the behavior of North Korea", stating that America's goal remains to get North Korea to enter six-party talks regarding its nuclear program. North Korea had previously stated it would not consider talk, but recently has changed its tune a bit. Today's move was probably more an effort to flex its muscles than anything else, but was still enough to help push oil prices higher.

Another factor that is surely contributing to today's rise is a report that came out on Friday by the International Energy Agency that forecast oil demand would increase 200,000 barrels a day this year, and increase 350,000 barrels a day next year.

For a better idea of just how strongly oil has been trading lately, let's take a look at a recent chart for the precious crude: