Nov. 21 (Bloomberg) -- West Texas Intermediate crude rebounded from near its lowest closing level in five months as the dollar weakened against the euro following comments by European Central Bank President Mario Draghi.
Futures advanced as much as 0.4 percent, reversing an earlier loss of 0.5 percent, after Draghi’s comments on inflation in Berlin. A weaker dollar typically makes oil more attractive for protecting against inflation. Prices also rose after Saudi Arabia, the world’s biggest crude exporter, said six mortar shells fell in an uninhabited area where the kingdom’s border meets with those of Iraq and Kuwait. The correlation between WTI and Brent is near its weakest in nine months.
“At the moment I don’t think it’s too much to worry about, but obviously if it is repeated and/or retaliations take place, it would directly spill over into oil prices,” Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark, said of the mortar attacks.
WTI for January delivery rose as much as 35 cents to $94.20 a barrel in electronic trading on the New York Mercantile Exchange and was at $94.07 as of 1:23 p.m. London time. Prices settled at $93.03 on Nov. 18, the lowest settlement since May 31. The December contract ended 1 cent lower at $93.33 when it expired yesterday. The volume of all futures traded was 49 percent less than the 100-day average.
Brent for January settlement gained as much as 52 cents, or 0.5 percent, to $108.58 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $14.37 to WTI, compared with $14.21 yesterday.
Draghi said keeping interest rates low for an extended period carries risks that policy makers weighed carefully before they reduced the benchmark rate to a record low on Nov. 7. The euro rose a third of a cent after his remarks and traded at $1.3465 at 1:24 p.m. in London.
“I am of course aware that our rate cut raised some concerns,” Draghi said today in a speech in Berlin. “A protracted period of time of low rates creates the scene for risks in financial stability.”
Six shells landed in an area close to the city of Hafr Al-Baten in Saudi Arabia’s Eastern region, according to the state-run SPA news agency. The mortars didn’t injure anyone or cause any damage, SPA said, citing Border Guard Brigadier General Mohammad Al-Ghamdi.
WTI’s 22-day correlation coefficient to Brent fell to 0.47 on Nov. 19, compared with an average of 0.77 over the past year, according to data compiled by Bloomberg. A figure of 1 means the two move in lockstep. U.S. prices fell 17 percent from this year’s peak in August as inventories expanded while the European benchmark declined 9.2 percent amid protests in Libya, attacks in Iraq and damage to pipelines in Nigeria.
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