Crude set for strong monthly rise

26 February 2010

Written By Bob Burton

Crude oil prices look set to retain the largest monthly rise seen since October as a weak dollar continues to provide support for the commodity.

Bloomberg data shows that crude futures are likely to rise 7.8 per cent this month, recovering from the 8.2 per cent drop witnessed in January.

Prices slumped at the start of the year after the cold snap seen in December failed to have any material impact on demand for heating fuels, despite widespread expectations of a large drawdown in heating oil and gas stocks.

This month's recovery has been supported in large part by the continued weakness of the dollar, which makes dollar-priced assets such as crude and heating oil more attractive to foreign investors.

However, David Moore, a commodity strategist at Commonwealth Bank of Australia, explained that prices are still out of joint with anaemic demand.

"Strictly speaking, the current level of oil demand doesn't actually warrant where prices now are," he explained.

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