Crude Hits Two-Week High on Drilling Concerns

Motivated by a mid-week stock market rally and government regulation of new drilling, crude buoyed above $75/barrel mark for the first time in ten days.

After touching a six-month low of 9,795 on Tuesday, the Dow Jones Industrial Average rebounded almost 5% to trade at 10,258 on Friday. Emboldened that the stock market's gains would equate to increased industrial demand, crude futures responded by exploding as much as 12% compared to Tuesday's low of $67.15. A moratorium on new deepwater oil drilling permits announced Thursday by the Obama administration gave the green light to more gains, propelling nearby crude futures to climb to $75.72/bl early Friday morning.

Additional factors that solidified crude's gains were a weakening U.S. dollar, continuing insecurity about the government's ability to stem the flow of stricken well leaking oil into the Gulf of Mexico, and a US National Oceanic and Atmospheric Administration report predicting 3 to 7 major hurricanes this year.

Hurricanes wield significant influence in commodity markets, often causing wild price movements in wide-ranging markets such as crude oil, gasoline, heating oil, as well as orange juice and lumber.

Precious Metals

Gold, silver and platinum rallied this week as investors swooped in and bought the metals at prices they viewed as bargains. On the week, gold rose from a low of $1175 to $1215 on Friday morning (+3%). Silver and platinum both catapulted more rapidly than gold, as the white metals both have significant industrial applications and benefitted from this week's positive economic outlook. Silver rose 70 cents on the week to $18.35/oz (+4%), while platinum jumped $110/oz from last week's low (+8%), trading Friday midday at $1556/oz. In the weeks ahead, traders will be watching inflation, industrial demand and global "flight to quality" fears for guidance on the direction of the metals markets.