Oil prices fall back to five-month low

OIL prices fell to five-month lows yesterday lifting stocks, while the dollar rose to six-week highs in a mostly technical rebound.

Crude fell for a fifth straight day, the longest daily losing streak in nearly 11 months, continuing its descent on ample US supplies and the prospect that BP would return its giant Prudhoe Bay field in Alaska to full capacity.

US stocks rebounded from two consecutive days of losses, as steadily declining oil prices offset more signs of a housing slowdown.

“The market is attempting a rebound and the positive news coming from the energy sector, that is the drop in oil, will give some support,” said Joseph Battipaglia, chief investment officer for Ryan, Beck & Co.

At midday in New York, the Dow Jones industrial average was up 32.58 points, or 0.29%, at 11,364.02. The Standard & Poor’s 500 Index was up 1.76 points, or 0.14%, at 1,295.78. The Nasdaq Composite Index was up 4.64 points, or 0.22%, at 2,159.93.

October delivery crude on the New York Mercantile Exchange fell as low as $66.65 a barrel.

Commodities sagged broadly, with spot gold hitting a six-week low around $606 per ounce earlier and the Reuters CRB index around a six-month low on the back of oil and metals’ weakness.

If commodity price declines were to reduce the inflationary pressure filtering into core gauges, that would confirm markets’ current belief that the Federal Reserve will not raise interest rates further, though a rate cut might be some time away.

The sense that the federal funds target rate might remain at 5.25% for some time lent some support to the dollar.

Currency traders drove the euro through technical support to a new six-week low. Bids that had kept the euro above $1.27 earlier in the session were either removed or were absorbed, and that allowed the market to continue to pare back bets against the dollar, as it has steadily done all week.

Late morning in New York, the euro was down 0.5% against the dollar at $1.2668.

The dollar rose 0.4% against the yen to 116.88.

Treasury prices briefly extended their gains after Cleveland Federal Reserve President Sandra Pianalto said that stability of inflation expectations had been a factor in her support of a pause in the central bank’s interest rate hikes last month.

“We had a pretty drastic move to the upside in yields earlier in the week and you have this commentary out of (San Francisco Fed President Janet) Yellen yesterday and Pianalto today I view as being dovish and that is trying to steer the market into a pause (in rates),” said George Goncalves, treasury and agency trading strategist with Banc of America Securities in New York.