Oil hovers below $79 after 3-day slide
SINGAPORE: Oil prices lingered below $79 a barrel Tuesday in Asia after three days of losses as investors eyed a volatile U.S. dollar.
Benchmark crude for December delivery rose 12 cents to $78.80 a barrel at midday Singapore time 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 it cheaper to international investors.
The euro touched a 14-month high of $1.5061 on Monday before closing at $1.4861. The euro strengthened slightly to $1.4882 in early Asian trading while the dollar fell to 92.06 yen from 92.21.
"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."
In other Nymex trading, heating oil was steady at $2.03 a gallon. Gasoline for November delivery held at $2.03 a gallon. Natural gas for November delivery slid 1.0 cent to $4.50 per 1,000 cubic feet.
In London, Brent crude for December delivery rose 6 cents to $77.32 on the ICE Futures exchange.