OIL UP 6%
March 19th, 2009Via: AP:
Oil prices hit news highs for the year Thursday after a decision by the Federal Reserve to spend billions snapping up U.S. bonds sent the dollar tumbling.
Oil is priced in dollars and when the U.S. currency weakens, it essentially makes crude cheaper.
Benchmark crude for April delivery surged $3.39 to $51.53 a barrel in light trading on the New York Mercantile Exchange. Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.
With the April contract set to expire Friday, most of the trading had shifted to the contract for May delivery. Crude prices on the May contract jumped $3.24 to $52.14 a barrel.
Analysts said investors flocked to crude stocks after the Federal Reserve announced late Wednesday it would buy long-term government bonds, a measure that’s expected to jolt the economy with lower rates on mortgages and other consumer debt.
The Fed also said a $1 trillion program to jump-start consumer and small business lending could be expanded to include other financial assets.
“You’re seeing wild swings in a lot of commodities today,” said Phil Flynn, analyst at Alaron Trading Corp. “The government is basically printing money to buy back all this paper, and it devalues the dollar.”
The U.S. dollar dropped against other major currencies Thursday morning. The euro traded at $1.3542, up from $1.3424 late Wednesday.
Flynn said the rise in oil shouldn’t be taken as a sign that the economy in on the mend. The Fed is using all of its powers to prop up American businesses, “and this is one of their last shots,” Flynn said. “If this doesn’t work, they’re out of bullets.”
