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Oil rose to $117 a barrel in New York on speculation that Russian crude may be disrupted because of rising tensions with the U.S., and as the weaker dollar bolstered the hedging appeal of commodities.
U.S. plans for a missile shield in Poland will “spur an arms race” in Europe, Russia’s Foreign Ministry said in a statement. Russia’s invasion of Georgia has disrupted the export of 1.1 million barrels of crude from the Caspian Sea. The U.S. currency fell against the yen and euro, driving investors to dollar-priced assets like gold and crude.
“Geopolitical risk in oil-producing regions, as we’re seeing with the tensions between the U.S. and Russia when the spare capacity buffer is low, is making prices volatile,” said Thina Saltvedt, a Nordea Bank AB analyst in Oslo. “Historically the correlation between oil and the dollar is high.”
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Crude oil for October delivery rose as much as $1.44, or 1.3 percent, to $117 a barrel on the New York Mercantile Exchange and was trading at $116.40 at 9:18 a.m. in London. Futures are down 21 percent from a record $147.27 on July 11. Prices are 68 percent higher than a year ago.
The September contract expired yesterday after increasing 45 cents, or 0.4 percent, to settle at $114.98 a barrel.
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“It’s really a reaction to the Russians’ strong reaction to this missile-shield agreement,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The concern is for a supply disruption from the world’s second- largest oil producer, Russia.”
