Oil rises to near $74 after US crude supply drop

[December 09, 2009]  PARIS (AP) -- Oil prices rose above $73 a barrel Wednesday after a report of an unexpected drop in U.S. crude supplies suggested demand may be recovering and the dollar weakened against other currencies.

By early afternoon in Europe, benchmark crude for January delivery was up $1.07 to $73.69 in electronic trading on the New York Mercantile Exchange. The contract dropped $1.31 to settle at $72.62 on Tuesday.

U.S. crude inventories unexpectedly dropped last week, the American Petroleum Institute said late Tuesday. Crude stocks fell 5.8 million barrels while analysts had expected an increase of 600,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department's Energy Information Administration plans to announce its inventory report -- the market benchmark -- later Wednesday.

"If the EIA number is similar, I think the market will jump $2 or $3 because this is a very bullish number," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore.

Traders were also eyeing the U.S. dollar. Investors tend to buy crude as a hedge against inflation and a weaker U.S. currency. A strengthening dollar usually helps push oil prices down.

The euro rose to $1.4751 from $1.4703 on Tuesday while the dollar fell to 87.97 yen from 88.38.

"Oil market fundamentals are actually improving slightly, but prices have gotten too high on a weak dollar and stronger equities, and they are still well above levels suggested by improving fundamentals," said a report from U.S. energy consultancy Cameron Hanover. "In a phrase: Oil prices are artificially high, even after the last few recent declines."

In other Nymex trading in January contracts, heating oil rose 1.19 cents to $2.0028 while gasoline gained 1.82 cents to $1.9421. Natural gas advanced 9.4 cents to $5.208 per 1,000 cubic feet.

In London, Brent crude for January delivery rose 73 cents to $75.92 on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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