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Oil prices rebound on AIG rescue, weaker U.S. dollar
Published in Saudi Press Agency on 17 - 09 - 2008

Oil prices rebounded Wednesday as a U.S. government rescue of insurer American International Group (AIG) calmed nervous investors who feared the company's collapse could have sparked a plunge in commodities, the U.S. dollar declined versus other major currencies, and U.S. gasoline inventories fell to a record low.
Light sweet crude oil for October delivery was up almost $1.50 to nearly $93 a barrel in early-afternoon trading on the New York Mercantile Exchange. The front-month contract had fallen $10 in the previous two sessions, bringing prices to their lowest level in seven months and down 8 percent for the year.
Wednesday's oil gain was energized by the rescue of AIG. The Federal Reserve (Fed) late Tuesday agreed to inject $85 billion in taxpayer money into the insurance giant in return for a 79.9 percent ownership stake. The bailout was aimed at avoiding an AIG collapse due to massive loses tied to the subprime mortgage crisis and tight credit.
If AIG had been allowed to fail, investors feared the company would seek to raise cash by selling positions in energy and other commodities, sparking a huge commodities liquidation.
A slightly weaker U.S. dollar also boosted oil prices. A falling dollar encourages investors to shift money into commodities, particularly crude oil, which is bought and sold in dollars.
Also on Wednesday, the U.S. government reported a bigger-than-expected decline in crude supplies, reflecting the shutdown of most gulf coast oil production because of two recent hurricanes. The Energy Information Administration (EIA) said crude inventories fell by 6.3 million barrels last week, far bigger than the 3.7 million barrel decline expected by analysts.
Gasoline supplies fell to a record low, posting the smallest inventory level since at least 1990, when the government began issuing weekly inventory data. Gasoline stockpiles fell 3.3 million barrels to 184.6 million barrels, the EIA said.
Inventories of distillates - including diesel, heating oil, and jet fuel - fell by a smaller-than-expected 900,000 barrels to 129.6 million barrels. U.S. refinery utilization fell 0.9 percentage points to 77.4 percent of total capacity, the lowest level since October 2005 when Hurricanes Katrina and Rita devastated the U.S. gulf coast.


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