Oil prices moved higher Tuesday as a weaker dollar put some traders in a buying mood as they awaited details on the Federal Reserve’s plan to boost the economy.
Benchmark crude for December delivery rose 95 cents to settle at $83.90 a barrel on the New York Mercantile Exchange.
Meanwhile, retail gasoline prices slipped, although some analysts think the dip is temporary because of rising oil prices. The national average for a gallon of unleaded regular is $2.803, according to AAA, Wright Express and the Oil Price Information Service. That’s 1 cent lower than a week ago but nearly 11 cents higher than a year ago.
The weekly SpendingPulse US Gasoline Demand Report showed demand at gas stations and retail outlets across the country was down 3.1 percent from the same week last year. Gasoline consumption in October was 1.7 percent below the same month in 2009.
It was the third straight day of gains for oil, driven primarily by a weaker dollar and expectations that the Federal Reserve will buy government bonds to stimulate the economy. An announcement is expected Wednesday after the Fed concludes a two-day meeting.
That, in turn, could weaken the dollar, depending on the amount of money the policymakers decide to put into the economy and the timeframe in which the buying would occur. Since commodities like oil and gold are priced in dollars, a weaker dollar makes them more attractive to buyers who use foreign currencies.
Many energy analysts, like Tom Bentz of BNP Paribas Commodity Futures, believe expectations for stimulus money are already built into commodities prices.
In addition, oil may be benefiting from comments by Saudi Arabian Oil Minister Ali Naimi, who said he would be comfortable with oil prices in a range between $70 a barrel and $90 a barrel, according to energy consultancy Cameron Hanover.
“This was the first time that he had suggested a range that high, always alluding to a range between $70 and $80 in the past,” the energy consultants said in a research note to clients.
Bentz said it is possible that oil could reach $90 a barrel because of outside influences on the market, including the weaker dollar and the potential for a bigger-than-anticipated stimulus package from government policymakers.
“But, there’s no shortages of anything anywhere as far as I’m concerned,” he said. “It doesn’t matter sometimes what the inventory levels are. Just as we get into the cold weather, you do tend to see a bump up in prices.”
In other Nymex trading in December contracts, heating oil added 1.59 cents to settle at $2.2936 a gallon, gasoline gained 1.67 cents to settle at $2.1096 a gallon and natural gas rose 3.8 cents to settle at $3.870 per 1,000 cubic feet.
In London, Brent crude rose 79 cents to settle at $85.41 a barrel on the ICE Futures exchange.
Associated Press writer Pablo Gorondi in Hungary contributed to this report.