US crude futures rose above $50 a barrel intraday for the first time in almost three weeks on Tuesday as the explosion of an Iraqi oil pipeline rekindled concerns about supplies.
Traders said the price rise was exacerbated by short-covering as many crude traders who had built up large short positions in recent weeks on expectations of falling prices were caught out by the rapid rise in the futures market. Oil prices were also boosted by a fall in the dollar to a record low against euro.
However, both Brent and WTI contracts staged noticeable retreats towards the close of trading on Tuesday.
The intraday gains come ahead of the US weekly crude inventories report, which is expected to show commercial crude stocks increasing for the ninth consecutive week due to a rise in imports. Distillate inventories, which include heating oil and diesel, are expected to rise, which would make it the first advance in 10 weeks.
January Nymex WTI crude futures peaked at $50.25 a barrel, before easing to $48.94, a rise of 30 cents by the end of New York trade. IPE Brent for January delivery rose 7 cents to $44.45 a barrel in London. Nymex will be closed on Thursday and Friday for US Thanksgiving.
Petroleum product prices were also higher. Nymex December heating oil gained 3.31 cents to $1.4780 a gallon, and Nymex gasoline futures were 2.91 cents up at $1.3185.
Last week, the net position in the US energy futures complex fell into its first net short position since November 11 2003.
Iraqi oil exports were cut by 700,000 b/d following an explosion on one of the southern pipelines on Monday, the first significant interruption of supply in southern Iraq since August.
Gold moved close to the $450 a troy ounce mark, only to fall short by 50 cents, but it was at its highest level since June 1988 as the dollar also fell to a nine-year low against a basket of currencies. Gold was quoted at $448.05/$448.80 a troy ounce just before the London close.
Cattle futures prices soared on market talk that a final test by the US department of agriculture would clear an animal suspected of mad cow disease, although the USDA said the test results were not yet complete. The December live cattle futures contract on the Chicago Mercantile Exchange hit an intra-day high of 87.30 cents/lb, before easing to 86.75 cents, a gain of 2.1 cents.
The first confirmed US case of mad cow disease, which was discovered last December, halted beef exports although several countries have since resumed buying. However, the rise in cattle prices was not welcome for pork prices as an all-clear decision on the mad cow issue by the USDA may encourage foreign buyers to increase beef purchases, and reduce their pork buying.