Oil and Gold Investing

Light, sweet crude for Octo­ber delivery rose 52 cents to set­tle at $115.11 a barrel on the New York Mercantile Exchange after earlier falling as low as $113.68. Trading was light heading into the Labour Day holiday now a week away, adding to the volatil­ity that has characterized the market in recent days, includ­ing a $12 price swing between Thursday and Friday.

At the pump in the United States, a gallon of regular gaso­line shed almost a penny over­night to a national average of $3.681, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices have dropped 15 cents a gallon in the last two weeks, according to the Lundb­erg Survey of 7,000 gas stations nationwide.

In Canada, the price averaged C$1.30066 per litre, according to price-watching website Gas­buddy.

com Crude traded erratically most of the day in lockstep with a wa­vering U.S. dollar, which has be­come the focal point for inves­tors trying to figure out whether crude is going higher or lower. The greenback gained ground against the euro earlier Mon­day, fell back, then gained again in a span of a few hours.

A stronger U.S. dollar typical­ly makes oil less attractive to in­vestors who buy commodities as a hedge against inflation and weakness in the U.S. currency. But prices were supported by fears that Gustav could threaten oil and natural gas production in the Gulf of Mexico. The storm was heading for the Dominican Republic and Haiti with maxi­mum sustained winds of near 100 kilometres per hour.

“The dollar wants to pull oil lower and the storm wants to pull it higher. It’s a bit of a tug-of­war right now," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

“We continue to see little chance for oil to be used by Rus­sia as a bargaining tool," said Olivier Jakob of Petromatrix in Switzerland. “Oil is the weapon of last resort, not of first resort . . . and it would make no sense for Russia to limit exports of crude or products to European countries."

In other Nymex trading, heat­ing oil futures rose 2.57 cents to $3.1568 a gallon, while gasoline prices rose 1.59 cents to $2.8845 a gallon. Natural gas futures fell 3.3 cents to $7.81 per 1,000 cubic feet.

In London, October Brent crude rose 33 cents to $114.25 on the ICE Futures exchange.

Oil’s uncertainty Monday fol­lowed a round of hyper-volatile trading last week. On Friday, crude fell US$6.59, or 5.4 per cent, to $114.59 a barrel. It was crude’s largest single-day price drop in percentage terms since Dec. 27, 2004.

That decline wiped out gains from an almost $6 ral­ly on Thursday. Analysts said the market’s inability to rally in the face of bullish news such as threats to energy supplies from a conflict between Russia and Georgia and another tropical stor m suggests that crude re­mains in a downward trend. Crude oil has dropped about $30, or 25 per cent, from record trad­ing levels above $147 a barrel reached last month.

“From the Caribbean to the Caspian, we’ve had one bullish headline after another and the market cannot generate a (sus­tained) rally," said Stephen Schork, an analyst and oil trad­er in Villanova, Pa. “It certainly doesn’t bode well for anyone who owns commodities."

Still, unresolved tensions be­tween the U.S. and Russia over the conflict in Georgia could re­kindle supply worries and send prices higher.

Russia pulled the bulk of its troops and tanks out Friday un­der a ceasefire agreement, but built up its forces in and around South Ossetia and Abkhazia, both separatist regions.

A U.S. navy destroyer loaded with humanitarian aid reached Georgia’s Black Sea port of Ba­tumi on Sunday, a development that a Russian general suggest­ed would worsen tensions be­tween the former Cold War foes. A Monday vote by Russian lawmakers unanimously ask­ing President Dmitry Medvedev to recognize the independence of Georgia’s two rebel provinces added to the concerns of energy markets.

Despite the conflict, some analysts said energy flows from Russia to the West were safe.