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Stronger Dollar Forces Crude Prices Lower

Energy and Capital's Weekend Edition

Written by Keith Kohl
Posted February 6, 2010

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publications.


This week was supposed to be the big rally... or was it?

After all, energy stocks across the board had been beaten down during the last two weeks. Yet if there was one thing we were confident about, it was that oil prices couldn't fall too low before the panic set in.

As you know, if crude prices fell below $65 for a sustained period of time, we would lose vital investments dollars in future production. OPEC has repeatedly stated it was comfortable with a price range of $70-$80 per barrel.

Once Monday finally rolled around, everything began to work out as expected. Crude oil jumped $1.54 per barrel, nearly reaching $75/bbl during trading that day. Things were even better on Tuesday as oil prices climbed another 3%.

But unfortunately, the good times didn't last...

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By the end of the week, oil declined to a seven-week low when it fell more than 8%. Still, we couldn't pin the blame on the small inventory build reported by the Energy Information Administration. The EIA's weekly report showed an increase of 2.32 million barrels to U.S. supply on Wednesday and another drop in gasoline demand. U.S. demand for gasoline is now at its lowest level in more than five years.

This time, we can thank the dollar. This week, the U.S. Dollar Index surged over European concerns, as well as a better-than-expected employment report, which showed the unemployment rate dropped to 9.7%.

Although the bad news keeps rolling in, we're still confident oil will stay within the $70-$80 barrel range as the recovery continues.

I know how hectic it can get during the work week. So in case you missed any of the top stories from Energy and Capital or our sister publications, I've included them below.

Enjoy your weekend,

keith kohl

Keith Kohl

Energy and Capital

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