Oil prices were back above $79 a barrel Tuesday as the dollar fell against the euro and the Japanese yen, supporting oil after three straight days of declines.
By midday in Europe, benchmark crude for December delivery was up 54 cents to $79.22 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.82 to settle at $78.68 on Monday.
Crude jumped to a 12-month high at $82 a barrel last week as the dollar weakened amid concerns that massive global stimulus spending will eventually spark inflation. Since oil is priced in dollars, a drop in the U.S. currency makes oil prices rise.
The euro touched a 14-month high of $1.5061 on Monday before closing at $1.4861. On Tuesday, the euro strengthened to $1.4890 while the dollar fell to 91.92 Japanese yen from 92.21 yen.
“A weakening dollar could put significant pressure on dollar-denominated oil prices in the months ahead,” Bank of America Merrill Lynch said in a report. “The combination of surging money supply, a rapidly weakening dollar and a cyclical improvement in oil demand could push oil prices above $100.”
Some economists, such as Jorg Zeuner of Liechtenstein-based VP Bank, expect the dollar and oil to stabilize over the next three to six months as inflation fears ease. And burgeoning inventories will likely satisfy any boost in demand triggered by a recovering global economy.
“We expect producers to increase output if prices keep rising,” Zeuner said. “We don’t think producers would risk killing the recovery by letting prices go to $100.”
JBC Energy in Vienna also said it expected the “downward movement in prices” to continue toward the $70-per-barrel level.
In other Nymex trading, heating oil rose 1.60 cents to $2.0495 a gallon. Gasoline for November delivery advanced 2.85 cents to $2.0623 a gallon, while natural gas for November delivery slid 0.3 cent to $4.51 per 1,000 cubic feet.
In London, Brent crude for December delivery rose 50 cents to $77.76 on the ICE Futures exchange.
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Associated Press writer Alex Kennedy in Singapore contributed to this report.
Business
<img src=" http://www.joplinglobeonline.com/images/zope/tuesday.gif" border=0> Oil up above $79 on weak dollar after 3-day slide
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